Dollar Dips for Third Straight Day, Hits Two-Month Low at R$ 5.94

The Brazilian real strengthened against the US dollar for the third consecutive day. The greenback closed at R$ 5.9465, its lowest level in two months.

This 1.40% drop came amid uncertainties surrounding US tariffs and expectations of increased tax revenue in Brazil. The dollar’s weakness against the real contrasted with its performance globally.

The DXY index, which measures the dollar against six major currencies, rose slightly by 0.10% to 108.165 points. The Brazilian currency’s strength stemmed from foreign capital inflows and anticipation of federal tax collection data.

Finance Minister Fernando Haddad hinted that tax revenue figures might exceed projections. This news bolstered the real’s position against the dollar. The currency market also reacted to the first days of the Trump administration.

Since Donald Trump’s inauguration on January 20, the dollar has gradually weakened against the real. Market participants had expected Trump to sign executive orders imposing trade tariffs on various countries immediately after taking office.

However, this did not materialize. Trump has only mentioned potential 25% tariffs on imports from Mexico and Canada, effective February 1. He also discussed possible tariffs on Chinese imports and raised the prospect of taxing European goods.

Brazil’s Market Outlook

Brazil remains unaffected by these potential measures for now. Paula Zogbi, Research Manager at Nomad, explained the market’s reaction. “The delay in implementing concrete measures related to campaign promises has led risk assets to price in a more benign scenario.

This ‘benefit of the doubt’ weakens the dollar, but volatility is likely to persist as the president continues to discuss potentially inflationary measures,” she said. The real’s appreciation reflects a cautious optimism in the Brazilian market.

Investors are closely monitoring both domestic economic indicators and international trade developments. The currency’s performance underscores the complex interplay between global economic forces and local financial conditions.

As uncertainties linger over US trade policies, the Brazilian real may continue to experience fluctuations. Market participants remain vigilant, ready to adjust their positions base on new developments in both the domestic and international economic landscapes.

LatAm Markets: Live Signals → — real-time movers, turnover leaders and FX across Latin America.