The Brazilian real strengthened to around 5.55 per US dollar after testing early August lows as markets absorbed stronger than expected labor data alongside a softer US policy outlook. Brazil’s unemployment rate fell to 5.2% in the moving quarter to November 2025, a record low and below both the prior 5.6% reading and expectations for 5.4%, reinforcing evidence of a resilient labor market despite still elevated real interest rates for households and firms. This resilience supports domestic demand and preserves room for the Brazilian Central Bank to maintain a hawkish stance should disinflation lose momentum. At the same time Brazil continues to offer exceptionally high real yields, with the 10 year rate remaining in double digits, sustaining portfolio inflows into local bonds and money markets through an attractive carry advantage over developed economies. Externally, easing expectations for US monetary policy have weighed on the dollar and narrowed interest rate differentials.