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Goldman Sachs has raised its three and six month USD/BRL exchange rate forecasts, placing election risk ahead of a later high-carry recovery. Goldman Sachs has raised its near-term USD/BRL forecasts as Brazil's election begins to command a larger risk premium.

The bank now projects the US Dollar to Brazilian Real exchange rate at 5.20 in three months, 5.10 in six months and 5.00 in 12 months.

Only the near-term forecasts moved “Our new USD/BRL forecasts are 5.20, 5.10, 5.00 in 3-, 6- and 12-months,” Goldman said.

The previous sequence was 4.90, 5.00 and 5.00, so the bank has raised the three- and six-month figures while leaving the 12-month destination unchanged.

With spot near 5.19 when the note was prepared, the revision chiefly removes the near-term Real appreciation that Goldman had previously expected.

That is not a wholesale bearish turn on the Real.

The revised profile implies modest BRL weakness during the first leg, followed by appreciation as USD/BRL declines from 5.20 to 5.00.

Goldman links the adjustment to the return of political risk as Brazil approaches its election.

The Real could still rally tactically, but the bank expects the exchange rate to respond both to changing probabilities for the candidates and to what each result could mean for the public finances.

“While BRL could tactically rally here, we think it will be difficult for USD/BRL to trade below 5.00, unless there is more clarity on fiscal consolidation post-election,” the report said.

The 5.00 level is both the 12-month destination and the threshold Goldman doubts can break without fiscal consolidation.

The forecast also sits inside a broader low-volatility environment in which carry has been a powerful source of returns.

Goldman expects high-carry currencies to continue outperforming once the immediate political premium fades, which explains why the medium-term trajectory slopes lower even after the near-term forecast revisions.

But the bank is explicit that the election can disrupt that sequence.

“Different election outcomes could push BRL away from this path over the medium-term,” it warned.

Timing defines the call: election uncertainty comes first and carry support later.

A 5.20 three-month forecast is not a call for uninterrupted Dollar strength, and a 5.00 12-month forecast is not a promise that fiscal concerns disappear.

Without clearer fiscal consolidation after the election, Goldman sees little room for USD/BRL to remain below 5.00.

Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.