The US dollar ended 2025 with its worst annual performance against the Brazilian real since 2016, falling 11.17%. At first glance, this might seem to contradict our bullish stance — but that drop is precisely what makes the opportunity interesting. Markets have already priced in a scenario that, in our view, is unlikely to unfold the way they expect.
Shifting Global Dynamics
Several geopolitical and macroeconomic developments have aligned in a way that supports the dollar over the medium term:
A new direction in American economic policy, emphasizing growth and deregulation, has underpinned sentiment in US markets.
Venezuela holds 303 billion barrels of proven oil reserves — the largest in the world. A regime change scenario would give the US access to this strategic supply, reshaping global energy dynamics.
US GDP growth has consistently outpaced expectations, while the labor market has stayed resilient through a period of elevated rates.
The Dollar as a Safe-Haven Asset
One of our strongest convictions is that the dollar functions as the world's ultimate safe-haven currency. When global stress rises, capital flows toward the greenback — regardless of where the crisis originates:
- 2008 Financial Crisis: The dollar strengthened even though the meltdown started on Wall Street
- COVID-19 (2020): A massive flight to quality sent investors rushing into the dollar
- Emerging market turbulence: Any bout of risk-off sentiment triggers capital outflows from countries like Brazil, pushing the dollar higher against the real
⚠️ Bitcoin and the AI Bubble
We believe 2026–2027 could bring a meaningful correction in risk assets, including cryptocurrencies and high-multiple tech stocks. Should that scenario materialize, the reflexive move would be a flight into the dollar, reinforcing our bullish view on the currency.
Brazil's Domestic Backdrop
Looking at the local picture, several structural factors in Brazil also tilt the scales toward dollar appreciation:
The Carry Trade Unwind
Brazil's Selic — the country's benchmark interest rate — currently stands at 15%, attracting a wave of foreign capital through the carry trade: investors borrow cheaply in low-rate countries and park the money in Brazil to capture the yield differential. As the Selic gradually falls toward 12% or below, that spread narrows, and the incentive to hold Brazilian reals diminishes.
The predictable result: foreign investors sell reals to buy dollars on their way out, generating natural demand for the greenback.
Fiscal Risk Remains Elevated
Brazil's public finances remain a persistent source of concern. High government spending, repeated challenges in meeting fiscal targets, and political uncertainty create a fragile backdrop for the real — exactly the kind of environment where the dollar tends to outperform.
🚨 Brazil's 2026 Election Year
Election years in Brazil have a well-documented history of currency volatility. Uncertainty about policy continuity after the vote typically pressures the real, adding another layer to our dollar thesis.
The Long View: A Structural Trend
Zooming out to the multi-decade chart, the dollar has consistently appreciated against the real. At the launch of the Real Plan in 1994, one dollar bought one real. Today, the exchange rate sits above BRL 6. That long-run trend reflects:
- Persistent inflation differential between the US and Brazil
- Higher productivity growth in the American economy
- The dollar's status as the world's reserve currency
- Brazil's recurring economic and political crises
Within that structural uptrend, the 11.17% pullback in 2025 looks like a cyclical retracement, not a trend reversal. We view it as a buying opportunity for investors who want currency exposure.
How to Build Dollar Exposure
We maintain a recommended allocation of 15% of the portfolio in dollar-denominated assets. Brazilian investors can achieve this through several channels:
- International brokerage accounts (Interactive Brokers, Avenue, etc.)
- US fixed-income ETFs
- Direct investment in US equities
- BDRs (Brazilian Depositary Receipts) of US ETFs listed on B3 (Brazil's stock exchange)
Bottom Line
Our bullish outlook on the dollar for 2026–2027 rests on a convergence of factors:
- The 11% dip in 2025 opened a better entry point than a year ago
- The geopolitical environment favors the US (Venezuelan oil access, strong economy)
- The dollar's safe-haven role becomes critical if risk assets correct
- Brazil's rate-cutting cycle will compress carry trade returns and drain capital
- Fiscal and electoral risks in Brazil keep the real under pressure
- The historical secular trend of BRL depreciation against the dollar
Holding dollar exposure is not speculation — it is geographic diversification and a genuine hedge against the risks of concentrating your entire net worth in a single emerging-market currency.
