Rising tide

BRAZIL ECONOMICS - Report 07 Jul 2025 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

The appreciation of the Brazilian real in 2025 has been accompanied by a similar movement in several other currencies, consistent with the global weakening of the U.S. dollar. When analyzing the real’s behavior against the basket of currencies that make up the Dollar Index, we observe only a modest appreciation.

This suggests that exchange rate movements have been largely driven by global dollar dynamics rather than domestic improvements, which would typically result in appreciation against all currencies. Fiscal risks in Brazil remain high, but were largely priced into asset values over the course of 2024.

This allowed the global depreciation of the dollar to pass through more smoothly to the exchange rate.

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