09/06/2024 – 10:13
The dollar fell against the real on Friday, in line with the US currency’s weakness abroad, as investors analyzed the August US employment report that raised expectations of a large interest rate cut by the Federal Reserve this month.
At 9:43 a.m., the spot dollar fell 0.57% to 5.5407 reais for sale. On B3, the first-maturity dollar futures contract had a negative variation of 0.01% to 5.586 reais for sale. See quotes.
On Thursday, the spot dollar closed down 1.19%, quoted at 5.5726 reais.
This morning, global markets turned their full attention to the U.S. nonfarm payrolls report, looking for further clues about the state of the country’s labor market and signals about the Fed’s next steps in its imminent monetary easing cycle.
Labor Department figures showed U.S. employers added a weaker-than-expected 142,000 nonfarm payrolls jobs in August, down from 89,000 the previous month.
Analysts polled by Reuters had projected 160,000 jobs would be created in August, compared with the 114,000 previously reported for July.
The unemployment rate fell to 4.2% last month from 4.3% in July, in line with expectations.
The result adds to weak private sector data released the day before. ADP’s August report had shown private employers adding 99,000 jobs, below the 145,000 expected, fueling fears of a deeper slowdown in the world’s largest economy.
That has seen traders raise their bets on an aggressive Fed rate cut at its Sept. 17-18 meeting, with a 55% chance of a 50 basis point rate cut, up from 43% ahead of the data and 30% a week ago.
Last month, Fed Chair Jerome Powell said “the time has come” to adjust the U.S. central bank’s monetary policy, adding that officials wanted to avoid further weakening of the labor market.
After the data, Treasury yields fell, making the dollar less attractive for investment, which strengthened its strong and emerging peers.
The two-year Treasury yield—which reflects bets on the direction of short-term interest rates—was down 9 basis points at 3.665%.
The dollar index — which measures the performance of the US currency against a basket of six currencies — fell 0.25% to 100.790.
The US currency fell against the Mexican peso, the South African rand and the Chilean peso.
Domestic scenario
On the national scene, the fall of the dollar was still driven by the prospect that, contrary to the Fed, the Central Bank should raise the Selic rate at this month’s meeting, amid the unanchoring of inflation expectations in a scenario of heated economic activity and a tight labor market.
“With the US economy cutting interest rates and rising rates in Brazil, the real should be a little more attractive, precisely for those investors who are less sensitive to risk assets or mainly from emerging economies and who expect a higher return on interest rates,” said Marcio Riauba, manager of the Operations Desk at StoneX Banco de Câmbio.
Traders had put a 97% probability that Copom would raise interest rates, now at 10.50% per year, by 25 basis points at its meeting on September 17 and 18.
The greater the interest rate differential between Brazil and the US, the better for the real, which becomes more attractive for foreign investments.
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