Brazilian Real General Info
Trading in Brazil’s real contributes to around 1% of the foreign exchange market’s daily turnover. The real is subdivided into 100 centavos.
The value of Brazil’s real is heavily influenced by commodities prices, given that the country’s top exports include iron ore, crude oil and the ‘soft’ commodities, especially soybeans.
As an emerging market currency, the real is considered riskier than currencies from major developed nations, which means that its value will fall against those currencies (especially JPY, USD, CHF, GBP and EUR) during periods of economic uncertainty or when global geopolitical risk is elevated, or during bouts of high market volatility.
Since the year 2000, the real’s highest valuation against the US dollar occurred in July 2011 when the exchange rate for USD/BRL fell to just 1.531. Its lowest value came in September 2015, when USD/BRL reached 4.248 following a plunge in commodities prices.Read our Travel Guide to Brazil
BRL - Currency Market News
In mid-August, BNP Paribas’ chief Latin America strategist forecast a rise in the real to R$3.0 against the US dollar by year-end, from rates of R$3.175 at the time.
A move to $3.0 would take Brazil’s currency to levels not seen since the first half of 2015 and would mark a near-6% rise in its value. The real was already up 2.5% on the year against USD.
The real had done well to recover losses from May’s frightening one-day crash which followed revelations of bribery and corruption involving the country’s president, Michel Temer. In moves likened by traders to those experienced during the 2008 financial crisis, the real fell by 8% on May 18th to R$3.4.
Much of the real’s recovery was, however, the result of a tumbling US dollar generally, and not because of anything particularly positive about the Brazilian political or economic outlook.
Against the euro, in mid-August, the real remained weak and was down 8% on the year. Against a regional peer, the Mexican peso, the real was close to its May 18th lows and was down nearly 12% on the year.
Despite Brazil’s economy growing 1% in Q1, ending the longest recession in the country’s history, annualized growth rates remain negative. Brazil’s economy contracted in the year ending March-31 by 0.4%.
Looking forward, a weak dollar, which typically leads to stronger commodities prices, should support the real given Brazil's status as a major commodities exporter. A weak dollar might also prompt capital flows to emerging markets.
Politically, while President Temer was seemingly let off the hook in August after Brazil’s Congress voted marginally for him to avoid standing trial on corruption charges, Brazil’s political situation will remain tense, at least until next year’s election.