20.08.202513:54:29UTC+00Brazilian Real Rebounds After Legal Shock

The Brazilian real strengthened toward 5.46 against the US dollar, nearing its highest point in nearly a year, last seen on August 12th. This movement followed the recent legal developments in Brazil that had previously increased the country's risk premium, accompanied by a slight reduction in external pressures as the dollar weakened globally ahead of the Jackson Hole symposium. The significant depreciation of the real was initially driven by a swift repricing of risk after a Supreme Court ruling declared that foreign laws do not have domestic applicability. This decision was perceived as intensifying the Brazil–US tension connected to Magnitsky-related sanctions and the recently announced 50% tariff on Brazilian goods by Washington, both of which expanded the risk premiums. Although the ruling did not explicitly address the diplomatic friction between the two nations, it was seen as a protective move for Minister Alexandre de Moraes, who is under US sanctions according to the Magnitsky Act. This development compounded the existing uncertainty regarding Brazil's fiscal and monetary policies, introducing additional legal uncertainty that heightened risk aversion further.