Brazilian investment firm XP has revised its exchange rate forecasts for the real, projecting the dollar at R$5.30 by the end of 2026, up from a previous estimate of R$5.00. For end-2027, XP now sees the dollar at R$5.50, compared with R$5.30 before.
Analyst Luíza Pinese pointed to rising domestic risk perception as the driver behind the revision. The real had appreciated nearly 10 percent until mid-October 2026 before losing strength and returning to levels seen at the start of the year, as Brazil risk premiums climbed.
Scenarios diverge sharply
XP’s base case assumes a stable global environment alongside a domestic fiscal situation that remains pressured but does not deteriorate further.
XP also modeled domestic-only shifts with the global backdrop held unchanged. If fiscal credibility improves, the firm sees the exchange rate at R$5.20. If fiscal risk increases instead, it sees R$5.70.
Risk gauges near past stress
XP said Brazil’s risk indicators, including CDS spreads and long-term interest rates, are near levels last seen during periods of strong stress, specifically end-2024 and early 2016. US Treasury yields remain at the highest levels in decades, the firm noted.
XP estimates that a 1 percent rise in the global dollar would be associated with a depreciation of the real, while a 10 percent rise in commodity prices would be associated with a 2.4 percent appreciation. The firm cites the global dollar, commodity prices, the Brazil-US interest rate differential, Brazilian CDS and long-term rates as the main drivers of the currency.
Brazil received $88.3 billion in foreign direct investment in the 12 months to September 2026. The country’s current account deficit over the same period stood at $60 billion.
Related: Citi raises end-2026 peso forecast to 18.20 per dollar · Dollar futures steady against real ahead of Fed decision
Source: XP
