Rabobank economists Mauricio Une and Renan Alves note that the Dollar (USD) closed last week at 5.1573, with the Brazilian Real (BRL) appreciating 1.6% over the week, ranking among the top emerging-market performers. Despite a still-wide interest-rate differential and a softer Dollar globally, they maintain a forecast for USD/BRL at 5.55 by end-2026, highlighting persistent geopolitical and fiscal uncertainties.

Real strength seen as temporary

“The dollar closed last week at 5.1573, implying a 1.6% appreciation of the real against the US dollar over the week (the third-best weekly performance across a basket of 24 emerging-market currencies). Even so, despite the still-wide interest-rate differential and a softer dollar globally, we continue to see USD/BRL at BRL5.55 at end-2026.”

“Our view: geopolitical risks continue to intensify, centered on the Strait of Hormuz. The macro consequences of higher oil prices remain uncertain and tariff uncertainty still clouds global trade, against the backdrop of heightened fiscal uncertainty in Brazil’s election year.”

“Domestically, industrial activity began the year showing tentative signs of recovery; the labour market remained robust; and February’s fiscal outturn was negative, but did not materially alter the view of a fiscal framework that is adjusting only gradually.”

“Externally, the US President’s speech dashed hopes of de-escalation: while he pledged to scale back operations in Iran gradually, he also issued fresh threats, reigniting fears of escalation, prompting an Iranian response and pushing oil prices higher.”

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