Brazilian real: After U.S. data, dollar drops to R$5.13 early but recovers slightly

RIO DE JANEIRO, BRAZIL – The commercial dollar and interest rate futures opened the business on Friday (3) in decline, reflecting the good mood of risk assets in international markets and even extended the low after data from the labor market in the United States surprisingly weak, moderating the movement minutes later.

At 12:50 PM, the dollar was down 0.25%, at R$5.17 in the spot market. At the minimum, it stood at R$5.1319, reflecting employment data from the American economy.

The rates operate in slight drops in the future interest rate market, in line with the exchange rate.

The Inter-financial Deposit (DI) rate for January 2022 fell from 6.88% to 6.865%; the DI for January 2023 varied from 8.67% to 8.685%; the DI for January 2025 retreated from 9.79% to 9.78%, and the DI for January 2027 was down from 10.20% to 10.19%.

The US labor market created only 235,000 jobs in August, well below the 720,000 expected by some economists.

The disappointing number is favorable for risk assets and tends to devalue the dollar globally, a movement that is currently taking place. The ICE Dollar Index (DXY), which compares the currency to strong rivals, dipped below 92 points after the data – earlier, it was down 0.22% at 92.02 points, as the dollar showed signs of weakness against major emerging currency pairs.

But the tumultuous domestic scene also affects investors’ posture. Besides keeping an eye on the fiscal issue, monitoring the payment of precatórios, and possible risks to the spending cap, financial agents continue to face a deteriorating relationship between the branches of Brazil’s government.

On the eve of September 7, Brazil’s Independence Day, which promises several acts of support for the government, President Jair Bolsonaro said that the “picture” of the holiday would serve as a “lesson” to all Brazilians.

In addition, the surprises coming from Brasilia in the voting of the economic agenda projects on Wednesday night increased the noise.

The approval of the income tax reform fed the market’s view that there is a lack of coordination between the government and Congress and kept the fiscal risks in focus, since it is still not known what the complete impact of the changes will be on tax collection.

For Commcor, the income tax reform “seems to have added to the set of recent political news and the current domestic economic environment that have been placing a sense of caution and uncertainty in investors.”

“Despite the more delicate domestic scenario, the important data from the United States may put pressure on the dollar in relation to other global currencies,” said the brokerage in a morning bulletin.

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