Dollar Plunges to 15-Month Low as Brazil’s Real Strengthens on Fed Expectations

Official market data from central banks and exchanges reveal the US dollar’s decline against the Brazilian real. Traders positioned for Federal Reserve easing while Brazil’s central bank held firm.

This shift marked the dollar’s lowest point in 15 months. The dollar closed at 5.3165 reals on September 15, down 0.71 percent from the prior session.

It hit 5.3087 during trading, the weakest since June 2024. Overnight into September 16 morning, the rate stabilized at 5.3165 with minimal fluctuation.

Brazil’s economy slowed, as the IBC-Br index dropped 0.5 percent in July. This exceeded forecasts of 0.2 percent decline. The third straight monthly fall signaled cooling activity.

Yet, this slowdown aided inflation control. Deposit interfinanceiro rates eased, with January 2027 at 13.985 percent. Longer contracts followed suit, down to 13.475 percent for 2032.

The Federal Reserve eyed a 25 basis point rate cut on September 17. Markets priced in 93 percent odds for this move. Some saw a 5 percent chance of 50 basis points.

Brazil’s central bank planned to maintain the Selic at 15 percent. This policy gap drew foreign capital. Investors sought higher yields in Brazil’s markets.

From a trade view, the stronger real raised export costs. Brazilian goods became pricier abroad, pressuring commodities sectors. Importers gained, as foreign products turned cheaper.

The US Dollar Index hovered at 97.22 in early September 16 trading. It reflected broader dollar weakness. Emerging currencies like the real benefited from this trend.

Charts showed a clear downtrend in USD/BRL. The daily view displayed lower highs from 5.70 in May to 5.32 now. Support held at 5.3083, resistance at 5.4350.

Simple moving averages crossed bearishly. The 50-day SMA dipped below the 200-day at 5.57. This confirmed sustained selling pressure. The relative strength index neared oversold levels at 30. It suggested potential short-term rebound.

Yet, momentum favored bears. MACD lines diverged negatively. The signal line stayed below zero, indicating weak upside. Bollinger Bands contracted, showing low volatility. Price hugged the lower band, hinting at continuation lower.

Volume spiked on down days, validating the drop. Red candles dominated recent sessions.
Fibonacci retracement placed support at 61.8 percent level near 5.31. A break could target 5.25.

The yellow line, tracking global liquidity index, trended downward. It aligned with falling dollar liquidity. This fueled carry trades into Brazil.

Traders watched for volatility post-decisions. Foreign exchange flows showed net outflows of 0.231 billion dollars recently. Yet, high Brazilian rates sustained inflows.

Overall, policy contrasts drove the real’s advance. Merchants faced mixed impacts, with exports challenged but imports eased. The market eyed central bank moves for next cues.

Related coverage: Brazil’s Economic Activity Index Contracts Sharply in July · China's Steel Hunger Meets Economic Reality as Iron Ore Navigates Property Crisis · Economic Progress Isn’t Enough for a Selic Cut, Says JP Morgan · Brazil Jobless Rate Drops to 5.6%, Lowest Since 2015

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief

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