The US dollar soared to its highest point against the real since last October on Wednesday.
This jump was fueled by unexpectedly high US Consumer Price Index (CPI) data, leading investors to speculate that the Federal Reserve might postpone rate cuts past June.
It closed up 1.41% at R$5.077, reaching R$5.084 in future contracts by late afternoon.
Brazil’s Central Bank responded by auctioning 16,000 swap contracts to manage June’s maturities.
Market rates for the dollar ended at R$5.077. The tourist rate also adjusted, with sales at R$5.292 and purchases at R$5.112.
Initially, the dollar dipped, reacting to Brazil’s lower-than-expected IPCA results. Yet US CPI data, surpassing forecasts, shifted the trend.
March’s CPI increase matched February’s 0.4%, but the year-over-year rise to 3.5% exceeded expectations.
This development, outdoing a forecasted 0.3% monthly and 3.4% yearly rise, spurred a spike in US Treasury yields.
This, in turn, affected Brazil‘s interest rates and strengthened the dollar globally.
With US inflation high, the Fed‘s likelihood of an imminent rate cut diminishes, diminishing Brazil’s appeal to international investors and pressuring the Real.
Conversely, Brazil’s IPCA rose modestly to 0.16% in March, below the expected 0.25%. The yearly increase stands at 3.93%, also under the anticipated 4.01%.