Exchange rate expected to fluctuate even more in 2025

Experts point out that the dollar will continue to fluctuate this year, influenced by US monetary policy, Brazil's fiscal situation and international geopolitical tensions

The dollar against the real is likely to continue to fluctuate throughout 2025 due to various internal and external factors, market analysts believe. For Maurício Mendes Dutra, managing director of Fictor Alimentos, among the main elements influencing the trajectory of the American currency are US monetary policy, Brazil's fiscal situation, the performance of the Chinese economy and the unfolding of geopolitical conflicts. These are the main points he takes into account in his day-to-day work as an executive.

As tensões internacionais ganharam maior peso nas últimas semanas, após o presidente Donald Trump impor tarifas escalonadas sobre produtos de diversos países, todos eles com déficits comerciais consideráveis com os Estados Unidos. A decisão, com efeito muito mais rápido do que era esperado, provocou uma forte aversão ao risco nos mercados globais, com destaque para o dólar.

The depreciation of the exchange rate reflects the pessimistic tone of investors, who see a horizon with a dangerous combination of inflation and economic stagnation, which could even unfold into a recession. 

In Mendes Dutra's assessment, although the real has appreciated against the dollar in the short term, due to the fall in the American currency, Brazil remains susceptible to fluctuations in global trade and foreign political choices, which can directly impact its economy.

“Antes de Trump retornar à presidência da maior economia global, ao olharmos para 2024, a manutenção de juros elevados nos EUA foi um dos principais fatores que fortaleceram o dólar, tornando os ativos americanos mais atraentes para investidores globais. Isso resultou na diminuição do fluxo de capitais para mercados emergentes, como o Brasil, e na redução da oferta de dólares no mercado interno, por conta da diminuição do diferencial de juros entre os dois países”, explica o executivo.

A study by the International Monetary Fund (IMF) points out that an increase in tariffs results in an appreciation of the real exchange rate proportional to the increase in tariffs, for example. The research analyzed data from 151 countries between 1963 and 2014.

History

Between December 12 and 26, 2024, the Central Bank of Brazil made interventions in the foreign exchange market totaling US$ 26.7 billion, in an attempt to control the appreciation of the American currency.

The oscillation of the real between R$ 4.85 and R$ 6.20 per dollar between 2023 and 2024 highlights the fragility of the Brazilian currency in the face of internal and external economic challenges and the reason why the interventions were made.

“A percepção de risco por parte dos investidores estrangeiros, somado ao aumento dos gastos públicos sem contrapartidas sólidas de arrecadação, tem gerado preocupações sobre a sustentabilidade da dívida pública brasileira, o que pressiona a moeda nacional”, ressalta Dutra. Ele complementa dizendo que a alta carga tributária e a complexidade regulatória também são fatores que dificultam o ambiente de negócios no país, afetando os investimentos de longo prazo.

Dutra also points out that the Chinese economy has a significant impact on the exchange rate in Brazil. With the slowdown in Chinese growth, there has been a drop in demand for Brazilian commodities, such as soybeans and iron ore, which has reduced the inflow of dollars into the country. In addition, China's diversification of global suppliers has reduced dependence on Brazilian exports, negatively affecting the trade balance.

Maurício Mendes Dutra evaluates three possible scenarios for the dollar exchange rate in 2025. In the most optimistic scenario, if Brazil makes progress with structural reforms and the US begins a cycle of monetary easing, the real could strengthen, with the exchange rate oscillating between R$ 4.80 and R$ 5.10. In a more pessimistic scenario, if US interest rates remain high and Brazil doesn't make progress on its fiscal agenda, the dollar could exceed R$ 6.00. In the base scenario, with a moderate accommodation of US monetary policy and gradual progress in the Brazilian economy, the exchange rate should vary between R$ 5.30 and R$ 5.70.

To mitigate exchange rate risks, he advocates adopting fiscal and administrative reforms, strengthening trade relations with other economies and encouraging the development of the local capital market. He also stresses the importance of maintaining robust international reserves and encouraging productive investment as fundamental strategies for containing currency volatility and promoting greater economic stability.

Website: https://fictoralimentos.com.br/

Source: Portal Terra