26.06.202515:24:38UTC+00Brazilian Real Gains Ground

The Brazilian real appreciated to 5.50 against the US dollar, nearing its strongest mark in eight months, recorded at 5.491 on June 19. This surge was driven by a weaker dollar and favorable domestic conditions. The repeal of the IOF tax on portfolio flows by Congress eliminated a fiscal barrier that had previously increased the cost of foreign investment, thus boosting the demand for reais. Additionally, mid-month inflation figures for June indicated a headline rate of 5.27%, below the anticipated 5.31%, suggesting easing price pressures and reinforcing expectations that the Selic rate will remain at its restrictive level rather than increase. Externally, the US economy's unexpected 0.5% contraction in the first quarter and Federal Reserve testimonies emphasizing a cautious approach led the dollar index to its lowest point since early 2022. This highlighted Brazil's significant real-rate differential. Furthermore, strong capital inflows from pre-salt oil auctions and a resurgence in agricultural exports have further reinforced the real's strength.