Dollar Rebounds, Closing at R$5.79 After Historic Decline Streak
Reuters reports the dollar rose to R$5.7942, marking its first increase since January 16, following a record-breaking sequence of declines against the Brazilian real.
The dollar’s value surged by 0.38% on Wednesday, despite a yearly decline of over 6%. This shift contrasted with global trends where the U.S. Dollar Index (DXY) fell by 0.32% to 107.637 points.
Domestic factors fueled the dollar‘s recovery. Brazil’s industrial production dropped by 0.3% in December from November, yet it grew by 1.6% year-over-year, per IBGE data, influencing interest rate expectations.
Finance Minister Fernando Haddad announced on February 5 that the government’s proposed income tax reform would include measures to offset any fiscal losses. He emphasized, “No tax relief in Brazil can occur without compensation.”
Meanwhile, President Lula hinted at potential retaliatory tariffs against the U.S. if Trump implements new taxes on Brazilian goods. Globally, fears of a U.S.-China trade war continued to depress the dollar.
China responded to new U.S. tariffs with its own on energy sectors, effective from February 10. U.S. service sector activity slowed in January, with the PMI dropping to 52.8 from 54.0, signaling a cooling demand.
On the employment front, the ADP report showed an increase of 183,000 private-sector jobs, strengthening expectations for a 50 basis point rate cut by the Federal Reserve by the end of 2025.
Despite these developments, the likelihood of maintaining current interest rates at the next Fed meeting in March remains high.
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