If inflation in the rest of the world is lower than inflation in Brazil,Brazil's currency (the real)would tend to appreciate.

Question

Quizplus · Accepted Answer

Typically, lower inflation in other countries relative to Brazil would lead to the real depreciating rather than appreciating, as investors would seek higher returns elsewhere. This is because lower inflation in other countries would mean their currencies are relatively stronger compared to the real, and hence, investors would want to hold those currencies instead, leading to a fall in the demand for the real and hence its depreciation.

If Inflation in the Rest of the World Is Lower