The Brazilian real has strengthened considerably against major currencies in recent weeks, hovering near R$4.99 to the dollar and R$5.89 to the euro on Wednesday. Those are levels the currency had not reached since early 2024, before a sustained period of weakness brought on by domestic fiscal uncertainty and a restrictive U.S. monetary policy pushed the dollar as high as R$6.30 toward the end of 2025.

The shift in fortunes traces back to late February. On the 28th of that month, a coordinated military operation by the United States and Israel struck targets inside Iran, killing Supreme Leader Ali Khamenei and setting off a chain of retaliatory strikes that sent oil prices sharply higher and rattled financial markets worldwide.

The initial reaction in currency markets followed a familiar script: the dollar strengthened as investors sought safety, climbing against most major and emerging market currencies in the days after the strikes. But as diplomatic signals emerged and crude prices began retreating from their peaks, that dynamic reversed — and Brazil found itself in an unusually favorable position.

Being one of the world's largest exporters of soybeans, iron ore, beef, sugar, and crude oil, Brazil benefited directly from the commodity price surge triggered by the conflict. Higher export revenues translated into greater demand for the real, providing a currency tailwind that most other emerging economies — more dependent on energy imports — could not access. As one analyst put it, while Asian peers absorbed the brunt of the energy shock, Brazil ended up comparatively better positioned.

Reinforcing that dynamic is Brazil's interest rate environment. The country's benchmark Selic rate remains among the highest of any major economy, and the gap between Brazilian and U.S. yields has widened to levels not seen since 2022. That differential has made Brazil an attractive destination for carry trades — strategies in which investors borrow in lower-yielding currencies and deploy the proceeds into higher-yielding assets — drawing substantial capital into the country's financial markets. According to B3 data, net foreign inflows into Brazilian equities have already surpassed R$65 billion in 2026, a figure that exceeds the total recorded throughout the entirety of 2025.

The euro and the pound have experienced similar declines against the real, each losing roughly 8.5% since January. Economists note that beyond the real's own appreciation, the broad weakening of the dollar has pulled other major currencies lower against the Brazilian unit. Europe's comparatively modest interest rates and a more fragile growth outlook have added further downward pressure on the euro specifically.