Dollar Closes Week Lower, Despite Gains on Soft U.S. Payroll Data

On Friday, the U.S. dollar saw a notable rise against emerging market currencies, buoyed by weaker commodity prices and underwhelming job data from the United States.

The U.S. Dollar to Brazilian Real (USDBRL) spot rate concluded the day at R$5.5901, marking a slight increase of 0.34%. Over the week, the currency fell by 0.80%.

Internationally, the Dollar Index (DXY), which measures the USD against a basket of six major currencies, modestly increased by 0.07%. This movement reflects broader global currency trends.

In the U.S., the employment scene garnered significant attention with the release of the August jobs report. It showed the creation of 142,000 jobs, falling below market expectations.

However, this figure represented an acceleration from July’s revised job numbers, which stood at 89,000. Despite these mixed signals, the unemployment rate aligned with forecasts at 4.2%.

Hourly earnings also surpassed expectations, showing stronger than anticipated growth both monthly and annually.

Financial markets are now largely betting on a 25 basis-point cut in U.S. interest rates by the Federal Reserve in their upcoming September meeting.

According to the FedWatch tool from CME Group, the likelihood of the central bank setting rates between 5.00% and 5.25% per annum is now at 73%. This is an increase from 60% the day before.

The chances of a more aggressive 50 basis-point cut, which would bring rates down to between 4.75% and 5.00%, have decreased from 40% to 27%.

This anticipated reduction in U.S. interest rates tends to decrease the dollar’s attractiveness as Treasury yields drop. As a result, risk appetite increases in higher-yielding markets like Brazil.

In Brazil, a sharp decline in commodity prices further diminished the allure of emerging market currencies like the Real against the Dollar.

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