Brazilian Real Expected to Weaken Against US Dollar Amid Fiscal Risks
Rabobank analysts Mauricio Une and Renan Alves expect the Brazilian Real to weaken against the US Dollar due to a fragile fiscal backdrop in Brazil. The analysts point out that softer US inflation and cooling labor data have given the Federal Reserve more time to assess policy.
The central bank of Brazil's Copom minutes highlight gradual transmission of restrictive policy and unanchored inflation expectations, which require interest rates to remain higher for longer.
With a narrowing rate differential between Brazil and advanced economies, Rabobank expects the exchange rate to return to BRL 5.35 per US Dollar by year-end.