Brazilian real collapsed: what is happening?

Brazilian real collapsed: what is happening?

USD/BRL rose to the highest level since March 2016. The selloff of Brazilian real has been very intense during the last 3 months.

Brazilian central bank keeps trying to stop the real’s fall by selling USD swaps. It announced that it had sold 40,000 contracts for a nominal value of $2 billion. However, so far, its interventions were unsuccessful.   

What are we to blame for the fall of the real? The first reason is the general strength of the US dollar against the emerging-market currencies. Increase in volatility and risk aversion of Forex traders add to the picture.

Another negative factor for the real is the rising political uncertainty in Brazil. The nation’s truckers are on a nationwide strike over fuel prices since the end of last week. Earlier, striking truck drivers blockaded roads so that the president Michel Temer ordered army and federal police to clear the blocked highways. Brazilian authorities also had to cut the price of diesel to calm down protestants. Still, it’s clear that the confidence in the current administration declined. Investors are now concerned because it’s likely that whoever wins presidential elections in October won’t conduct the painful but necessary fiscal reforms.

Add Brazil’s shaky economic growth to the picture and you’ll understand that the medium-term and the long-term outlook for the Brazilian real is negative.

Central banks of Argentina, Turkey, and Indonesia have recently increased interest rates to combat the freefall of their national currencies. Brazil’s central bank left rates unchanged for the first time in 19 months in May. The regulator didn’t raise rates as it’s worried about the global economic risks and how they may affect Brazilian economy.

Making a forecast, we can see that the real will remain under pressure. Given the economic and political troubles, it won’t be able to show sustainable strength ahead of the elections. As a result, only short-term corrections will be possible.

For USD/BRL the important levels lie at the psychological mark of R$4.00 and the all-time high at R$4.25. There’s still scope for the pair to go there. Support is at R$3.80 and R$3.77.




Latest news

Deposit with your local payment systems

Learn more

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.


A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in 00:30:00

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

Beginner Forex book

Beginner Forex book will guide you through the world of trading.

Beginner Forex book

The most important things to start trading
Enter your e-mail, and we will send you a free Beginner Forex book

Thank you!

We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free.

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera