The Brazilian real strengthened toward 5.30 per US dollar and moved back toward the 5.283 level last seen in June 2024 as a softer US dollar and clearer domestic policy signals narrowed external pressure on the currency. The dollar weakened amid rising concern about a possible US government shutdown and ahead of key US data which reduced safe haven demand for the greenback. At home the Central Bank governor emphasised that activity shows signs of resilience and that policy will remain data dependent while officials signalled a sustained period of high rates near two decade highs which reassured markets that easing will be gradual rather than abrupt. Finance Minister Haddad’s public commitment to meet fiscal targets and avoid asset sales lowered fears of sudden fiscal loosening and helped contain risk premia. Mid month inflation running around 5.32% year over year supports a cautious approach to easing and removes a clear trigger for policy surprises.