SÃO PAULO (Reuters) – The dollar rose against the real this Friday, accumulating gains in the week and remaining within striking distance of closing above R$5, after recent North American data imposed a cautious mood ahead of the policy meeting next week’s Federal Reserve monetary policy.
The US currency in cash closed up 0.22%, at R$4.9986 on sale, after having surpassed R$5 at the session’s highs. During the week, the dollar accumulated an increase of 0.34%.
Much of those gains came after data showed on Thursday that the producer price index for U.S. final demand rose more than expected in February, while retail sales rose less than expected but still accounted for an acceleration compared to the previous month.
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“The data released has a direct impact on the way the market interprets the behavior of the Federal Reserve and when the interest rate cut will begin… it has damaged confidence in the prospects for interest rate cuts by the Federal Reserve this year,” said Bruno Nascimento, analyst at B&T Câmbio.
“To end the week, we just have to wait for Super Wednesday.”
The Federal Reserve will wrap up its two-day monetary policy meeting next Wednesday, and the prevailing expectation remains that the Fed will keep its key rate unchanged until a first cut in June, although yesterday’s data prompted some traders to postpone bets until the start of monetary easing.
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Citi said in a report this Friday that, following the higher inflation data for North American producers, the risk of the Fed changing projections for a possible interest rate cut cycle increased. However, “for emerging market debt, the global environment remains favorable to ‘carry’, and we continue to trade Latin American high-yield assets on the long side,” economists at the bank said in a report.
“Carry” is the name given to the return that can be obtained from “carry trade” strategies, in which loans are taken out in a country with low interest rates and the money is invested in more profitable markets, in a way that profits from the difference in fees.
Meanwhile, in Brazil, there is a consensus that the Central Bank will reduce the Selic again by 0.50 percentage points, to 10.75%, when it ends its monetary policy meeting next week, also on Wednesday.
Despite this certainty, economists are alert to possible changes in the municipality’s guidance on its next steps, a Reuters poll showed this Friday.
