The U.S. dollar begins the week strong against the Brazilian real, mirroring a global trend of dollar appreciation.
Today, U.S. Treasury yields are rising again. Specifically, the ten-year note went past 4.5%, a first since 2007.
This trend boosts the dollar. Moreover, worries about China impact currencies tied to commodities.
At 9:40 a.m., the spot dollar had gained 0.32%, at R$ 4.9481. In contrast, the October futures contract rose 0.21% to R$ 4.9460.
Internationally, the DXY index was up 0.12% at 105.706 points.
September ends this week. The month saw higher U.S. rates and rising commodity prices, mainly oil.
For most of the month, the dollar struggled against the real. However, renewed Treasury yield hikes and China concerns stalled the real.
So far, the dollar is down 0.11% against the real for the month.
About U.S. rates, more hikes are likely, mainly in long-term yields. If this happens, the real might weaken as the dollar globally strengthens.
Last week, the DXY index saw its tenth straight week of gains.
China’s mood is also low. Property giant Evergrande abandoned a $35 billion debt restructuring plan.
This move adds stress to China’s property market. As a result, metal prices are falling. S&P cut China’s GDP growth outlook from 5.2% to 4.8% this year.
Brazil’s August current account deficit was lower than expected. This fact limits drastic depreciation of the domestic currency.
Background US Dollar
For added context, the U.S. dollar’s behavior is part of a bigger picture. Global events like U.S. Treasury yields and China’s state shape it.
A yield increase implies possible U.S. rate hikes, affecting currencies like the real. Uncertainties from China can have a ripple effect.
These events affect commodity prices and connected currencies. Brazil’s lower-than-expected deficit takes some pressure off the real.
Yet, caution remains for the currency’s near future.