FX.co ★ Brazilian Real Near Monthly Lows

The Brazilian real has dipped towards 5.4 against the US dollar, closing in on monthly lows as a result of a global risk-off sentiment and a less aggressive forecast for Brazil's central bank actions. The resurgence of US tariff threats targeting Europe has intensified global demand for safe and liquid assets, consequently strengthening the dollar against currencies from emerging markets. Domestically, Brazil has experienced a quicker-than-expected decline in inflation, with recent figures moving closer to the central bank's target range. This development has led the markets to anticipate earlier cuts to the Selic rate, diminishing Brazil's carry trade attractiveness and the motivation for foreign investors to hold onto real-denominated assets at existing levels. Political and regulatory developments have also contributed to the apprehension, such as Finance Minister Fernando Haddad's proposal to extend central bank oversight over investment funds. This has raised concerns among some market participants about potential constraints on institutional independence, further dampening confidence in the currency.