02.09.202513:26:05UTC+00Brazilian Real Weakens to Mid-August Lows

The Brazilian real slipped beyond 5.47 against the US dollar, approaching levels last observed in mid-August, as markets adjusted in response to a pronounced slowdown in economic activity. The country's GDP growth for the second quarter diminished considerably, recording an expansion of 2.2% compared to the same period the previous year — marking the most sluggish growth rate in over three years. Contributing to this downturn is a significant decline in investment, highlighted by a 2.2% drop in gross fixed capital formation. This reduction is attributable to Brazil's 15% Selic rate, one of the highest real interest rates globally, which continues to hamper credit availability and dampen business activity. Policymakers have committed to maintaining this rate at an elevated level to stabilize inflation expectations around the 3% target. Concurrently, the US dollar strengthened as investors returned following the holiday weekend, gearing up for pivotal labor market reports that could influence the Federal Reserve’s upcoming policy decisions.