02/08/2024 – 10:16
The dollar rose against the real on Friday, above 5.75 reais and extending the previous day’s gains, as investors showed greater risk aversion after job creation data in the United States came in well below expectations.
At 9:45 a.m., the spot dollar rose 0.5% to 5.7652 reais for sale. On B3, the first-maturity dollar futures contract rose 0.02% to 5,772.5 reais for sale. See quotes.
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On Thursday, the spot dollar closed the day quoted at 5.7364 reais for sale, up 1.43%, reaching the highest closing price since December 21, 2021.
The U.S. Labor Department said jobs were created 114,000 in July, down from 179,000 in the previous month, revised down from a previously reported 206,000. Economists polled by Reuters had forecast 175,000 jobs added in July.
The number reinforces the argument that the US labor market is cooling amid a scenario of high interest rates, which would justify the beginning of a monetary easing cycle at the Federal Reserve. This scenario, in theory, would be good for the real.
But, in addition, the result increases market fears about a weakening in US economic activity with a cooler-than-expected labor market, generating risk aversion and strengthening the dollar against its emerging peers.
Financial players had already voiced their fears the day before, when a measure of U.S. manufacturing activity fell to its lowest level in eight months.
Traders raised their bets on a 0.5 percentage point U.S. interest rate cut in September to a 70% chance. Before the data, there was a 70% chance of a 25 percentage point cut.
The Fed kept interest rates unchanged at its meeting on Wednesday but opened the door to a cut at its next meeting amid a backdrop of inflation slowing back to its 2% target.
“This environment of weaker data for the US is reinforcing a perception of a ‘growth scare’ in the country, that is, a fear, a concern among investors that the economy may be slowing down more quickly and intensely than expected,” said Leonel Mattos, Market Intelligence analyst at StoneX.
“If the payroll data is very weak, it is likely to have an effect of intensifying this risk aversion,” he added.
As a result, the US currency strengthened against other emerging currencies besides Brazil, rising against the Chilean peso and the Mexican peso.
Markets are also watching the performance of the yen, which has been experiencing a renewed recovery since the Bank of Japan raised its interest rate on Wednesday.
The projection of higher interest rates in Japan had already been guaranteeing gains for the Japanese currency in recent weeks, with the reversal of “carry trade” operations, when investors withdraw their resources from countries with low interest rates and invest in places with higher interest rates.
The dollar was down 1.55% against the yen, at 147.05.
Commodity prices are also on the radar, as tensions in the Middle East increase and the worsening economic outlook for China, the world’s largest importer of raw materials, is being analyzed.
The dollar index — which measures the performance of the US currency against a basket of six currencies — fell 0.73% to 103.600.
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