Brazil’s currency, the real, has become the worst-performing major currency this year, dropping by over 20% to a record low of almost 6.3 to the dollar. The situation worsened in recent weeks, with investors selling off despite efforts by the central bank to intervene.
The decline is largely due to conflicting fiscal and monetary policies. The government’s spending plans are expected to lead to higher inflation, which the central bank aims to control through interest rate hikes. However, these measures could further weaken the economy and slow down housebuilding.
The Brazilian real has been under pressure since 2022, when President Jair Bolsonaro left office. Since then, the government’s economic policies have faced intense scrutiny. The situation is now being closely watched by investors and economists worldwide.
Meanwhile, other countries in the region are also facing economic challenges. For example, Ukraine is winning the economic war against Russia, while Iran is struggling to cope with sanctions imposed by its rivals.
Source: https://www.economist.com/finance-and-economics/2024/12/19/why-brazils-currency-is-plunging