Dollar Rises on Eve of Payroll Report Amid Fiscal Concerns

The dollar closed higher on Thursday as investors awaited the U.S. payroll report. Concerns about Brazil’s fiscal situation supported the American currency’s upward movement.

The dollar rose as much as 1.20% before settling back. At the end of trading, the spot dollar showed a 0.54% increase, reaching R$ 5.47.

It touched a low of R$ 5.4503 and approached a high of R$ 5.5107. The euro advanced 0.50% to R$6.0464. The South Korean won and the South African rand were among the most devalued currencies.

The British pound led to the losses. The dollar showed strength early in trading, appreciating in almost all liquid currency markets.

A local financial institution’s currency manager attributed the dollar’s rise to payroll data expectations. He suggested investors might be reducing risk. Uncertainty surrounding the Iran-Israel conflict may have contributed to market unease.

The dollar’s strength was also bolstered by Bank of England President Andrew Bailey’s softer tone. The pound performed poorly against the dollar, allowing the DXY index to advance.

Comments from Moody’s executive moved markets as agents adjusted their fiscal risk perceptions. Samar Maziad of Moody’s emphasized that future rating revisions might not be as quick as the last one.

Dollar Fluctuations and Outlook for the Real

The dollar reached its daily high, advancing more than 1.20% amid these comments. However, it lost momentum in the afternoon. Andres Abadia of Pantheon Macroeconomics believes conditions remain favorable for the real in the short term.

Abadia noted that iron ore prices, healthy domestic demand, and Moody’s credit rating upgrade could boost the real. He cautioned that increased geopolitical risk might limit further currency gains.

Challenges like adverse weather conditions and a strong labor market persist. However, rising commodity prices and improved sentiment suggest the real is positioned for continued short-term gains.

In addition, foreign investors long dollar positions in the derivatives market decreased at the end of Wednesday’s session.

B3 data shows that foreign investors’ positions in dollar mini, dollar futures, swap, and foreign exchange coupon (DDI) are at $61.8 billion.

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