The dollar rose against the Brazilian real on Friday, nearing the R$5 mark, after U.S. data prompted caution ahead of next week’s Federal Reserve policy meeting.
It closed up 0.22% at R$4.9986, touching above R$5 during the day, with a weekly gain of 0.34%.
Thursday’s data showed higher-than-expected U.S. Producer Price Index rise, while retail sales growth accelerated but fell short of forecasts.
“Market confidence in potential Fed rate cuts this year is undermined by these data releases,” stated Bruno Nascimento, B&T Câmbio analyst.
Attention now turns to “Super Wednesday.”
The Federal Reserve concludes its two-day monetary policy meeting next Wednesday.
The prevailing expectation is for rates to remain unchanged, with the first cut anticipated in June.
However, recent data has led some to delay their predictions for the start of monetary easing.
Citi reported increased likelihood of Fed adjusting rate cut cycle projections due to higher U.S. producer inflation data.
Yet, “the global environment remains favorable for ‘carry’ trades, and we continue to favor Latin America’s high-yield assets,” bank economists said.
“Carry” refers to the profit gained from investing in higher-yielding markets using funds borrowed in low-interest-rate countries.
In Brazil, consensus holds that the Central Bank will cut the Selic rate by 0.50 percentage points to 10.75% at its next policy meeting, also on Wednesday.
Economists remain vigilant for potential shifts in Central Bank direction, per a Friday Reuters survey.