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>>USD/BRL Rate: Markets Evaluate the Selic Outlook and Foreign Capital Inflows – Societe Generale Report

USD/BRL Rate: Markets Evaluate the Selic Outlook and Foreign Capital Inflows – Societe Generale Report

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about 3 hours ago

Dual Drivers of USD/BRL

The real’s price against the dollar swings on two main forces: Brazil’s monetary policy and global capital flows. Rate decisions by the Central Bank and Fed announcements trigger sharp moves around data releases. This dual sensitivity creates heightened uncertainty for investors.

Selic Rate Outlook

The Selic sits at 10.75%, one of the highest yields among emerging markets, supporting the real via carry‑trade demand. Inflation is easing, prompting talks of gradual cuts through 2025. Market futures price modest reductions, which would shave the currency’s yield edge.

Foreign Capital Sensitivity

Portfolio inflows track Brazil‑US rate differentials, risk appetite and commodity price trends. Strong export earnings in soy, iron ore and oil bring dollars that buttress the real, while external debt creates periodic dollar demand. Direct investment in infrastructure and renewables adds a steadier base.

Broader Structural Context

Societe Generale’s model links short‑term moves to Selic expectations and medium‑term shifts to flow dynamics, flagging scenarios of Fed tightening or fiscal strain that could push USD/BRL higher. Compared with peers, Brazil’s larger market and diversified exports give the real a middle‑ground volatility profile. Ongoing reforms and fintech growth aim to improve productivity and long‑term currency stability.