Dollar Holds Firm Against The Real After A Fed Independence Scare

Key Points

• USD/BRL stayed near 5.37 despite broad dollar softness, showing Brazil’s mix of carry support and fiscal fragility.
• Brazil’s dollar futures were busy: 155,000 DOL contracts traded, totaling R$41.84 billion ($7.78 billion).
• Selling pressure looks to be fading, but the pair is still boxed between 5.35 support and 5.40 resistance.

The dollar opened Tuesday near 5.37 per real, with USD/BRL at 5.3728 on ICE at 08:03 UTC, essentially unchanged from Monday’s close around 5.3723–5.3725 (+0.11%–0.12%).

The stability mattered because the global dollar was weaker. By late Monday, the dollar index (DXY) was down about 0.27% near 99.86.

The spark was politics in Washington: renewed pressure from President Donald Trump’s camp on Federal Reserve Chair Jerome Powell, including a threat of criminal proceedings tied to his congressional testimony and a push for sharply lower rates.

Powell denounced the move as a pretext to gain more influence over interest rates, putting institutional rules back at the center of pricing.

Nomad strategist Nickolas Lobo said the episode risks undermining credibility, adding uncertainty to the U.S. rate path and encouraging diversification and hedges such as gold.

Goldman Sachs economist Jan Hatzius said the threat “reinforced” worries about Fed independence, even if policy remains data-driven.

Positioning looked cautious: fund-flow data through January 7 showed meaningful outflows from U.S. equity funds, while bonds and money markets drew demand.

Overnight, Asian equities hit records, with Japan leading, while gold stayed prominent as a hedge. Brazil offered its own cross-currents.

The central bank’s Focus survey trimmed 2026 inflation expectations to 4.05% and kept the year-end Selic forecast at 12.25%, underpinning the carry trade.

But the Treasury’s latest projections pointed to gross debt rising through 2032, peaking at 88.6% of GDP, keeping a fiscal premium embedded in the real.

Charts argue for consolidation, not a clean reversal. RSI sat near 38.8 on the 4-hour chart and 40.3 on the daily (about 44.9 weekly). MACD readings improved slightly, suggesting downside momentum is easing.

Traders are treating 5.37 as the magnet: a break below 5.35 opens 5.32–5.33; rebounds face 5.39–5.40, then 5.44–5.45, with a heavier 5.48–5.50 cap.

This is part of The Rio Times’ daily coverage of the Brazilian real exchange rate and Latin American financial markets.

For B3 equity market context, see The Rio Times’ Ibovespa session report for the same date.

For the macro context, see Brazil’s Morning Call for the same date.