The US dollar paused its three-day rally, falling against the Brazilian real on Monday.
This downturn mirrored the dollar’s global retreat as markets braced for upcoming US economic reports.
The spot dollar closed at R$4.9821, marking a 0.23% decline. Yet, it has risen by 0.88% throughout February.
On Brazil’s B3 exchange, future dollar contracts dropped 0.35% to R$4.9800 by late afternoon.
Early in the day, the dollar dipped against the real, only to momentarily rise, hitting R$4.9970. Overseas remittances briefly fueled this increase.
Later, global dynamics influenced the market. With crucial US economic updates due, the dollar weakened against a broad range of currencies.
Investors are keenly awaiting the US GDP’s second revision on Wednesday and the PCE inflation index on Thursday.
“External factors led to the dollar’s retreat after its brief gain,” noted Jefferson Rugik from Correparti Brokerage.
The dollar’s lowest point, R$4.9710, aligned with Brazil announcing a new hedge program for foreign sustainable project investments.
This program introduces currency hedging derivatives, supported by a $3.4 billion allocation from the IDB for sustainable projects exceeding ten years.
The Central Bank of Brazil will bridge investors to these derivatives.
Additionally, the program will offer specific credit lines for sustainable investments.
Central Bank’s Green Investment Focus
Central Bank President Roberto Campos Neto clarified the hedge’s aim: to support green investments, not control volatility, deviating from usual swap operations.
Campos Neto also hinted at possibly extending swap contract durations to provide the market with clearer options.
However, this announcement came as the Central Bank sold all 16,000 currency swap contracts for the April rollover.
By late afternoon, the dollar index, which compares the US dollar to six major currencies, fell 0.19% to 103.770.
In short, this reflects the market’s anticipation of US economic data and its potential impact.