São Paulo, Brazil – The dollar surged to R$5.37 against the real today, fueled by both external pressures and renewed fiscal concerns following the Brazilian Chamber of Deputies’ rejection of a key government proposal. The U.S. currency reached a high of R$5.3808 in the afternoon,a 0.71% increase, mirroring strength seen in international markets.
The setback occurred Wednesday night when lawmakers removed from the agenda provisional Measure (MP) 1303, which concerned taxation of financial investments. The measure’s failure to be analyzed effectively resulted in its rejection and the loss of an anticipated R$14.8 billion in revenue for 2025 and R$36.2 billion in 2026, according to the Ministry of Finance.
President Luiz Inácio Lula da Silva stated he will discuss alternatives with ministers next week regarding how the financial system, especially fintechs, can address the now-uncollected tax revenue.Finance Minister Fernando Haddad indicated he would present Lula with several options.
The dollar’s rise coincided with a broader strengthening of the U.S. dollar globally, with the dollar index climbing 0.56% to 99.408 as of 5:06 pm. The yen also weakened against the dollar, reaching a multi-month low, as did the real.
Nilton José David, Director of Monetary Policy at the Central Bank, noted that half of the real’s thankfulness this year is attributable to the currency’s inherent strength, while the other half stems from dollar weakness.He also highlighted the unique structure of the brazilian foreign exchange market, where over 90% of liquidity is concentrated in derivatives, making spot market intervention less effective.
The Central Bank intervened in the market today, selling 40,000 currency swap contracts to roll over November maturities.
A leading presidential candidate recently emphasized the central bank’s independence in setting monetary policy, while also asserting that decisions must align with the government’s objectives.
