The Brazilian real has experienced the lowest volatility in a decade, attracting local investors and potentially drawing foreign interest. Brazilian hedge funds have increased their long real positions to record levels. Despite a 1.5% decline this year, similar to other emerging-market currencies affected by the USD’s strength, the Selic rate’s expected reduction from 11.25% to 9.5% and an inflation forecast to decrease to 3.9% by year-end suggest a favorable environment for the real.