Rabobank economists Mauricio Une and Renan Alves reported that the Dollar (USD) closed last week at 5.1573 against the Brazilian Real (BRL), with the BRL appreciating 1.6% over the week. This performance ranked the BRL as the third-best weekly performer among a basket of 24 emerging-market currencies [1]. Despite this temporary strength and a still-wide interest-rate differential, Rabobank maintains its forecast for USD/BRL at 5.55 by the end of 2026, citing persistent geopolitical and fiscal uncertainties [1].
The economists highlighted that geopolitical risks are intensifying, particularly centered on the Strait of Hormuz. The macroeconomic consequences of higher oil prices remain uncertain, and tariff uncertainty continues to cloud global trade. These factors are compounded by heightened fiscal uncertainty in Brazil, especially in an election year [1].
Domestically, Brazil's industrial activity showed tentative signs of recovery at the start of the year, and the labor market remained robust. However, February's fiscal outturn was negative, though it did not materially alter Rabobank's view that Brazil's fiscal framework is adjusting only gradually [1].
Externally, the US President's recent speech dashed hopes of de-escalation in the Middle East. While he pledged to scale back operations in Iran gradually, he also issued fresh threats, reigniting fears of escalation. This prompted an Iranian response and pushed oil prices higher, adding to global uncertainty [1].
CONCLUSION
Rabobank sees the recent appreciation of the Brazilian Real as temporary, maintaining a forecast for USD/BRL at 5.55 by end-2026 due to ongoing geopolitical and fiscal risks. Despite some positive domestic economic indicators, global uncertainties and rising oil prices are expected to weigh on the currency outlook. Market sentiment remains cautious, with medium impact expected as investors monitor developments.