Currency News: Brazilian Real Rallies in the Midst of Political Turmoil

Currency News

Brazil has seen tumultuous times in the last year. The country is facing a deep recession, downgrades from rating agencies, bleak unemployment rates, a huge fiscal deficit, and political unrest. In 2015, the Brazilian real hit a record low with one U.S. dollar equaling R4.25. Yet, in recent weeks, the real has appeared to be on an upward swing. There are a few contributing factors, but political turmoil seems to be the biggest component to the currency’s rise.

Currency News

A perceived weakness of the U.S. economy and a collapse of imports has lead to a balancing of the currency. Plus China’s demand for steelmaking has lead to an increase of about 46% in iron ore production in the last year. This gives the Brazilian economy a big boost since Vale, a Brazilian mining company, accounts for about a fifth of the global iron ore market.

While these small boosts helped the real, the big contributor to the rally in the economy has come from the most recent political news. Former President Lula was charged this week for his alleged involvement in a multi-billion dollar money laundering scheme. After a long period of deep recession, this move has given hope to investors that a change in Brazil’s political sphere may come sooner than previously expected.

Still, the future is unclear for the real. Analysts note that even if the government leaders change, the new officials will face the same economic troubles that current President Rousseff is now facing.

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