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XP Investimentos noted in a recent report that the decrease in the value of the dollar in December might have been overstated. Analysts adjusted their forecast for the currency exchange rate at the end of the period from R $ 6.20 to R $ 6.00 due to a partial recovery of the real earlier in the year.
The house also lowered its long-term estimates, reducing the forecast from R $ 6.40 to R $ 6.20 by the end of 2026.
XP also stated that if the dollar returns to R $ 6.00, the exchange rate is likely to remain low, with their model predicting the American currency to be valued at R $ 5.90.
Recent fluctuations and effects on the domestic exchange rate are the reasons for the R$ 0.10 variance, according to XP. They believe that the risk balance leans towards a higher depreciation of the exchange rate compared to the projected R$ 5.90.
Economists Rodolfo Margato, Luíza Pinese, and strategists Victor Scalet and André Buzzini believe that the chances of a more severe trade war and the implementation of unconventional economic policies in Brazil have risen in the past few weeks.
Brazil’s upcoming electoral cycle is expected to lead to increased exchange rate volatility, with analysts projecting the dollar to reach R $ 6.20 by the end of 2026, aligning with inflation differentials.
Real showed stronger global performance against the US dollar on Wednesday (5).
On Wednesday (5), the Brazilian real outperformed the US dollar and 32 other global currencies, with the US dollar closing the day down by 2.72% at R$ 5.75.
The dollar had its poorest showing since October 2022, dropping by 4.03% to R $ 5.17 during the election battle between Luiz Inacio Lula da Silva and Jair Bolsonaro, leading to Lula’s PT party emerging victorious.
The Brazilian stock market reopened after being closed for two days due to Carnival, and experienced a session characterized by a shift from the negative sentiment that had dominated the previous week’s trading. Despite this, the Ibovespa index ended the day slightly up, in line with other global stock markets.
On the previous Friday, the dollar recorded a 1.5% increase against the Brazilian real, marking its largest uptick since January 24 when it reached R $ 5.91. Throughout the week, the U.S. currency saw a 3.25% increase, with a monthly gain of 1.39%.
Investors were mainly concerned about the tariffs imposed by the US on its key trading partners. Scholarship performance improved as the US government announced a one-month delay in imposing tariffs on imported cars from Mexico and Canada.
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