Economy

For the first time this year, Brazilian real regained value within a month

Valued at BRL 5.34 per dollar, though, the real still accumulates a 33.17% in 2020, the worst performing currency in the world

Brazilian currency
  • In May, the dollar fell 1.9% against the real, the first drop within a month since the beginning of 2020;
  • The exchange rate reached its low point on May 14, when real was valued BRL 5.94 per dollar.

After four months of strong devaluations, Brazil‘s currency has finally regained some lost ground. In May, the dollar fell 1.9% against the real, the first drop within a month since the beginning of 2020. A more favorable environment to risk abroad, the Brazilian Central Bank’s more incisive stance on distortions in the foreign exchange market and better results on the country’s external accounts were drivers of the movement.

The depreciation that was seen up to mid-May, when the US currency reached BRL 5.94, suggests the dollar’s hike might have been somewhat exaggerated – fueled by political tensions. But, with an exchange rate of BRL 5.34 per dollar, the real still accumulates a devaluation of 33.17% in 2020, the worst performing currency in the world. 

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On Friday, the dollar fell following market relief after the pronouncement of Donald Trump about China. A major concern was the risk of a breach of the trade agreement or heavier sanctions on Chinese goods, but this did not happen despite the US president’s critical tone.

“Investors were afraid that something worse would happen, but it didn’t. For now, the situation is under control between China and the USA, but it should worsen in the coming weeks and months given the relationship between them in the recent past”, Adriano Cantreva, partner at Portofino Investimentos told Valor Econômico. For him, “this is the main risk that it is still not priced by the market”.