By Brazil Stock Guide – During Gabriel Galípolo’s mandate at Brazil’s Central Bank, the Ibovespa Index (IBOV) has surged 34.18% in dollar terms through August 28, 2025, according to data from consultancy Elos Ayta. This marks the second-best annual performance since 2010, behind only 2016, when the benchmark soared 66.46% in dollars amid a sharp depreciation of the U.S. currency.
Inverse correlation between dollar and stocks
Historical analysis shows that in 14 of the past 16 years, the U.S. dollar and the Ibovespa in dollar terms moved in opposite directions. In practice, a stronger dollar typically drags down foreign returns from Brazilian equities, even if local prices rise in reais. Only in two years did both move in the same direction.
“Currency is what drives foreign appetite for Brazil,” said a São Paulo-based equity strategist. “When the real strengthens, global investors quickly reprice Brazilian assets.”
High rates, weaker dollar, equity rebound
The dollar’s slide in 2025 also reflects global forces. The return of Donald Trump to the White House brought expansive fiscal policies and new trade measures that weakened the U.S. currency. Against this backdrop, the Brazilian real gained ground, amplifying equity returns for foreign investors.
In years when the dollar strengthened sharply — such as 2015 (+47.01%), 2020 (+28.93%) and 2024 (+27.91%) — the Ibovespa in dollar terms plunged 41.03%, 20.18% and 29.92%, respectively. The 2025 rally therefore represents a reversal of that pattern, recovering part of recent losses and putting Brazil back on the radar of international investors.
Even so, the index remains below its 2016 dollar peak, underscoring the persistence of volatility.
Context and outlook
Galípolo’s mandate combines firmness against inflation with the challenge of preserving Central Bank independence amid political pressures. The Ibovespa’s performance in 2025 highlights the decisive role of monetary policy and currency dynamics in shaping Brazil’s market trajectory.
Speaking this week at the 33rd Fenabrave Congress in São Paulo, Galípolo stressed that Brazil’s benchmark Selic rate, now at 15%, will remain at restrictive levels for an extended period. “We are in a scenario where we missed the inflation target twice – at the end of 2024 and mid-2025 – and with expectations and projections from both the market and the Central Bank pointing to a slow convergence toward the target,” he said. “This is what has required a more restrictive monetary policy, precisely to achieve convergence.”
Galípolo took office in January 2025, succeeding Roberto Campos Neto, and adopted a firm stance against inflation. The Central Bank raised the Selic rate to 15% in June, the highest level in nearly two decades, following a tightening cycle that began in late 2024. That decision kept Brazil’s interest rates among the highest in the world, even as local assets staged a strong recovery abroad.
Markets now expect that, as inflation gradually converges toward target, the Central Bank will begin cutting interest rates in 2026. Economists expect rate cuts to begin only in late 2025 or early 2026, as inflation gradually converges toward target.
Leave a Reply