Brazil: Real Hits Two-Week Low.

The Brazilian real weakened to its lowest in over two weeks at 5.60 per USD on November 10th amid prospects of a narrower US-Brazil interest-rate differential. Hotter-than-expected October inflation reinforced expectations of further Federal Reserve hikes. A narrower differential would pressure the real by reducing carry trade. The real also remains weighed down by domestic issues, including a challenging outlook of weaker growth, higher inflation and fiscal uncertainty after President Lula’s reelection. Meanwhile, the Copom minutes maintained the previous statement’s hawkish tone, reiterating that unanchored inflation expectations require tighter monetary conditions for longer. The BCB held the Selic rate at 13.75% at its latest meeting, pausing its easing cycle. In the minutes, the bank identified impacts from supply shocks on prices and demand-side inflationary pressures, but noted that the slowdown in economic activity could intensify.