FX.co ★ Brazilian Real Weakens

The Brazilian real weakened toward 5.22 per US dollar on Thursday as mounting energy shocks and hardline rhetoric from Tehran revived safe-haven demand for the greenback. The move marks a pullback from recent highs after Mojtaba Khamenei declared that the Strait of Hormuz would remain closed, triggering a sharp repricing of global inflation risks and weighing on emerging market assets. Although crude prices near $100 per barrel typically support Brazil’s fiscal revenues, investors are increasingly focused on the risk of imported inflation. Brazil’s annual IPCA inflation rate eased to 3.81% in February, initially fueling expectations for more aggressive monetary easing. However, the BCB is now seen adopting a more cautious stance at its March 18 meeting, with traders paring back wagers on a 50 basis point cut in favor of a smaller 25 basis point reduction to the 15% Selic rate, aiming to preserve the currency’s yield advantage as global interest rates are expected to remain higher for longer.