The U.S. dollar experienced a notable decline against the Brazilian real on Friday, marking an end to its recent streak of weekly gains.
This downturn was primarily driven by U.S. inflation data that aligned with market expectations, subsequently lowering Treasury yields.
On Friday, the U.S. dollar closed at a 0.94% decrease, valued at 5.1168 reais.
This marked its most significant daily drop in a week and hit its lowest closing level since April 11th, which was 5.0908 reais.
Over the past week, the dollar decreased by 1.58%, halting a four-week run of strong gains during which it had surged by about 4%.
The decline in the dollar came as Treasury rates fell following the release of U.S. inflation data.
The Commerce Department reported that the Personal Consumption Expenditures (PCE) price index, which the Federal Reserve closely monitors, rose by 0.3% in March.
The annual inflation rate based on this index increased to 2.7% from 2.5% in February, matching the economic forecasts.
Market reactions were tempered by these inflation figures. March PCE data showed a steady rise without exceeding market fears, especially after high inflation readings earlier in the quarter.
Despite initial expectations of a sooner easing by the Federal Reserve, market participants have now adjusted their forecasts.
They now anticipate the beginning of interest rate cuts towards the end of the year.
In Brazil, earlier data showed that the IPCA-15 inflation index rose less than expected in April. A drop in transportation costs offset rising food prices, bringing the 12-month rate below 4%.
This adjustment in the dollar’s value reflects a broader reassessment of expectations regarding U.S. monetary policy. This reassessment continues to impact global currency markets significantly.