Bank of America Backs Latin American Currencies as Dollar Expected to Weaken in 2026.

Bank of America has issued a bold forecast for 2026, predicting a significant weakening of the U.S. dollar and advising investors to consider Latin American currencies as promising alternatives. The financial giant highlighted the Brazilian real and other regional currencies as key beneficiaries of shifting global monetary dynamics.

Dollar Outlook

Analysts at Bank of America explained that multiple factors are converging to put downward pressure on the dollar. Among them are expectations of continued interest-rate cuts by the Federal Reserve, slowing U.S. economic growth, and a shrinking liquidity environment. The bank’s foreign-exchange outlook suggests that these conditions will make the dollar less attractive compared to emerging-market currencies.

Latin America’s Advantage

Latin American economies, particularly Brazil, are seen as well-positioned to capitalize on this trend. Central banks across the region have already embarked on rate-cut cycles, creating opportunities for investors through carry trade strategies—borrowing in low-yield currencies to invest in higher-yield ones. Bank of America noted that despite challenges such as global trade tensions, Latin America remains attractive for investors seeking robust returns.

Investor Implications

The recommendation signals a potential shift in global investment flows. If the dollar depreciates as expected, funds may increasingly move into Latin American markets, strengthening regional currencies and boosting local economies. However, analysts cautioned that risks remain, including political instability and external shocks that could affect investor confidence.

Broader Context

This forecast comes amid a wider debate about the resilience of emerging markets in the face of global uncertainty. While Latin America has historically been vulnerable to volatility, Bank of America’s outlook suggests that 2026 could mark a turning point, with regional currencies gaining favor as the dollar loses ground.