Rabobank strategists Mauricio Une and Renan Alves note that the US Dollar (USD) ended the previous week at Brazilian Real (BRL) 5.1086, with the Brazilian Real appreciating 1.2% and ranking third among 24 emerging currencies. They highlight expectations of a smaller spread between local and global interest rates in 2026 and a fragile domestic fiscal backdrop in an electoral year, leading Rabobank to project the US Dollar at BRL 5.35 by year end.

BRL strength but Dollar recovery eyed

"Externally, the US and Iran have resumed the exchange of bellicose attacks, raising tensions by putting the MoU at risk and casting uncertainty to future global prices formation."

"Our view: the recent exchange of bellicose attacks exposes the fragility of the MoU previously struck by Iran and the United States."

"The dollar ended the previous week at R$ 5.1086, implying a weekly appreciation of 1.2% of the BRL vis à vis the USD, the third better weekly performance among 24 emerging currencies."

"With the expectation of a smaller spread between local and global interest rates along 2026 and eventual global recovery of the greenback amid a fragile domestic fiscal environment in the middle of an electoral year, we expect the US dollar to post R$ 5.35 by year end."

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