Brazilian Real Hits Highest Level in Over a Month

The Brazilian Real posts gains for the third consecutive day against the US Dollar, reaching its highest level in over a month.

This appreciation of the Brazilian Real has led to a decline in the USD/BRL exchange rate, which has dropped to 5.93—its lowest level since January 16. Previously, the pair tested an all-time high of 6.30 reais per dollar at the end of December.

USD/BRL

The U.S. president announced after his inauguration that he intends to impose a 25% tariff on Canada and Mexico, set to take effect on February 1. Late Tuesday, Trump also proposed a 10% tax on goods imported from China starting in February, citing concerns over fentanyl entering the United States from the Asian giant.

Real Appreciation Drivers

For now, Brazil is not among the countries affected by the U.S. tariffs, as both nations have maintained a strong trade relationship for decades. In 2024, the trade balance between the two countries favored the U.S. by $253 million.

Additionally, the American president stated that import tariffs on Chinese products could depend on an agreement regarding the ownership of TikTok.

This development has sparked a wave of optimism in global markets, which had been worried about the possibility of Trump imposing more aggressive tariffs on trade partners.

As a result, the global foreign exchange market is undergoing a technical correction, following a high level of long positions (bets on dollar appreciation). Investors are taking advantage of the relief brought by the U.S. decision not to impose immediate tariffs on key trade partners under the new Trump administration to reduce their exposure to the American currency.

In Brazil, there are reports of dollar inflows, with foreign investors returning to the B3 secondary market for five consecutive sessions.

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ABOUT THE AUTHOR See More
Ignacio Teson
Ignacio Teson
Economist and Financial Analyst
Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.
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