On Friday, the dollar saw a modest increase against the Brazilian real, responding to easing measures by European central banks.
This made the American currency more attractive. Now, eyes are on the U.S. for its upcoming economic and inflation updates.
The dollar climbed 0.38% to R$4.9986, holding steady week-over-week despite briefly topping R$5.
Its rise reflected broader trends, with the dollar gaining against key currencies after the European Central Bank hinted at possible mid-year rate cuts due to falling inflation.
Additionally, the Swiss National Bank’s rate cut underscored a shift towards more aggressive monetary easing in Europe compared to the U.S., sparking dollar gains.
The Federal Reserve kept its rates unchanged, with future projections suggesting possible reductions.
Yet, Fed Chair Jerome Powell emphasized that such cuts hinge on confidence in achieving a 2% inflation target amidst a robust economy.
Felipe Garcia of C6 Bank suggested international developments might boost the dollar if global activity intensifies or inflation remains high.
He believes local influences will be secondary to global inflation data, impacting the Federal Reserve’s rate decisions.
The Brazilian real’s slight boost followed the Central Bank of Brazil‘s rate cut announcement.
By reducing the Selic rate to 10.75%, the bank signaled cautious future cuts, potentially supporting the real’s resilience due to a slower, narrower interest rate differential with the U.S.
After the rate cut announcement, the real outperformed other emerging market currencies, demonstrating its attractiveness for carry trade strategies.
Domestically, President Luiz Inácio Lula da Silva’s government projected a manageable primary deficit for 2024, despite revising down revenue expectations.
Market observers noted this had little impact on Friday’s currency movement, with international factors playing a more significant role.