While the Brazilian real’s performance last year largely tracked the behavior of peer currencies abroad, the currency’s dynamics in 2026 have been driven mainly by domestic factors. According to a study by BTG Pactual reviewed in advance by Intraday, Valor’s financial markets blog, this shift helps explain the real’s recent depreciation since mid-May, which the bank says has been predominantly driven by local developments.
In the report, economist Iana Ferrão breaks down the real’s performance using a model that separates global influences—those aligned with the behavior of comparable currencies—from idiosyncratic factors specific to Brazil, producing what she refers to as a “fair value.” The measure is not intended to represent an equilibrium exchange rate, but rather a statistical benchmark.
A comparison between 2025 and 2026 shows that the real appreciated against the U.S. dollar in both years, but the factors behind that appreciation were markedly different.
“In 2025, the real’s appreciation was explained almost entirely by the global/peer factor: the currency strengthened 12.83%, fair value increased 12.8%, and the global factor contributed 13.07 percentage points, while the real-specific component was essentially neutral (-0.27 percentage point). In other words, the real moved in line with a favorable trend common to peer currencies, with little additional positive contribution from Brazil once that broader group was controlled for,” Ferrão wrote.
The composition changed in 2026. “Through June 9, the real had appreciated 5.42%, with fair value rising 5.53%. Unlike 2025, however, most of the movement explained by the model came from the real-specific component: 4.27 percentage points, compared with 1.26 percentage points from the global/peer factor,” the study noted.
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According to Ferrão, identifying a “real-specific component” does not mean external shocks are ignored. Rather, the model attempts to isolate how the Brazilian currency reacts relative to comparable currencies. “The oil shock and Middle East conflict, for example, are external events. But if Brazil benefits more—or suffers less—than the selected peer currencies, that difference appears as a real-specific component. In economic terms, the specific component captures Brazil’s relative performance in response to the same global shock,” she explained.
The economist said the real’s appreciation during the first months of 2026 largely reflected global dynamics, but that relationship began to break down in March.
“Between the start of the conflict in the Middle East and mid-May, the Brazilian currency’s performance was dominated by the real-specific component, even though the trigger was essentially external. Although the origin of the shock was global, Brazil outperformed most of its peers, consistent with the country’s relatively favorable external position,” she said, referring to Brazil’s status as a net oil exporter.
That favorable backdrop for the real, however, faded in mid-May. “Between May 12 and June 5, the real depreciated 5.34%. Most of that correction came from the BRL-specific component (-4.21 percentage points), driven by political events, while the global/peer factor accounted for only -0.90 percentage point. The interpretation is that the correction during this period was not primarily a move common to peer currencies; rather, it reflected a relative deterioration of the real compared with the currencies included in the model.”
The depreciation that followed stronger-than-expected U.S. payroll data last Friday (5) reflected a combination of global and domestic factors. “The 2.48% depreciation observed between June 3 and June 8 was explained roughly 40% by the global/peer factor and 60% by the real-specific component. This interpretation is consistent with an environment of broader dollar strength following stronger U.S. economic data, but it also suggests a relative deterioration of the real compared with comparable currencies.”
Although the period analyzed is very short, Ferrão said the recent episode reinforces one of the report’s key conclusions: “movements associated with global events are not always explained primarily by the global factor.”
The report also breaks down the rise in the dollar’s value against the real since the end of 2017, when the exchange rate stood at R$3.31, compared with R$5.19 today.
“Of the two components, the real-specific factor accounts for roughly 78% of the movement (+1.46), versus 22% from the global/peer factor (+0.42),” Ferrão said. “Therefore, the structural depreciation of the real since 2017 has been largely idiosyncratic—not simply a reflection of what happened to the basket of peer currencies. Even over a longer horizon, the domestic risk premium—fiscal, interest-rate, and political factors—remains the main driver of where the real stands today,” she concluded.
