09/19/2024 – 9:46
The dollar fell against the real this Thursday, the 19th, with investors reacting to the confirmation the day before of the increase in the interest rate differential between Brazil and the United States, after an increase in the Selic rate and a large cut in the Federal Reserve rate.
At 9:35 a.m., the spot dollar fell 0.65% to R$5.4247 for sale. On B3, the first-maturity dollar futures contract fell 0.77% to R$5.420 for sale. At the opening, it reached R$5.40. See quotes.
On Wednesday night, after the markets closed, the Monetary Policy Committee (Copom) decided to raise the basic interest rate by 25 basis points, to 10.75% per year, in a unanimous decision by its board, which began to see a scenario with a higher risk of rising inflation ahead and also suggesting a possible overheating of the Brazilian economy.
The first interest rate hike in just over two years came after central bank officials drew attention in recent weeks to the strength of economic activity and said that a tightening of interest rates was a possibility.
The announcement alone would, in theory, be positive for the real, as a higher Selic rate makes the Brazilian currency more attractive for “carry trade” operations, in which investors borrow money in countries with low interest rates and invest in places with higher rates.
But the effect of Copom’s decision was further complemented by the divergent move by the US central bank, which reduced its interest rate by 50 basis points, starting a new cycle of monetary easing, as authorities show greater concern about the cooling of the labor market.
According to the chairman of the US central bank, Jerome Powell, the “decision reflects our growing confidence that, with an appropriate reset of our monetary policy stance, labor market strength can be maintained in a context of moderate growth and inflation moving sustainably towards 2%.”
With investors analyzing the Fed’s decision and awaiting the Copom’s announcement in the previous session, the spot dollar had already closed Wednesday down 0.48%, quoted at 5.4601 reais.
The impacts of the Fed’s easing could also be seen in other currency markets, with the dollar retreating against most of its strong and emerging market peers.
The dollar index — which measures the performance of the US currency against a basket of six currencies — fell 0.12% to 100.900.
The US currency was still losing against the Mexican peso and the South African rand.
The future outlook is even more positive for US currency pairs, including the real.
Traders are betting the Fed will cut rates by another 71 basis points by the end of this year, with more cuts expected next year, according to CME’s FedWatch tool.
In Brazil, the market sees more interest rate hikes in 2024, with an 81% chance of a 50 basis point increase in the Selic rate at the next Copom meeting in November.
“I believe that this morning we are seeing a market opening that seems to me to be consistent with what the pace will be until the end of the year,” said Matheus Spiess, an analyst at Empiricus Research.
“I am optimistic about this final window for 2024, it is a context that seems promising to me.”
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