The dollar advanced this Monday and closed above 5 reais for the first time in around four and a half months, a reflection of the markets’ greater caution before the “Super Wednesday” of monetary policy decisions.
The US currency in cash advanced 0.54%, to 5.0254 reais on sale. It is the first time that the dollar closes a trading session above the psychological mark of 5 reais since October 31, 2023, when it stood at 5.0405 reais.
Traders said this movement followed the rise in US government bond yields. This afternoon, the ten-year Treasury yield — a global reference for investment decisions — rose 3 basis points, to 4.334%.
“The week is marked by caution, with investors awaiting central bank decisions and monitoring economic indicators… inflation in the US continues to rise, fueling fears that the Fed may keep interest rates at high levels for longer “, said Diego Costa, head of foreign exchange for the North and Northeast of B&T Câmbio.
The Federal Reserve’s monetary policy meeting will end on Wednesday, when the central bank is expected to maintain interest rates, according to market forecasts. Investors will be attentive to clues from Fed authorities about their next steps, at a time when financial agents have been rethinking the timing of a first cut in the US base rate.
Traders postponed bets on when the Fed will cut borrowing costs mainly after US producer and consumer inflation data surprised to the upside this month, which has given a broad boost to the dollar.
In Brazil, the Central Bank will also end its monetary policy meeting on Wednesday, with wide expectations of a new cut of 0.50 percentage points in the Selic, to 10.75%, but with doubts about whether the autarchy will maintain the guidance of maintenance of this pace of easing in the “next meetings”, a Reuters survey of economists showed.
“Just looking at inflation, there is room for the Copom to continue lowering interest rates. However, it may be that the Committee members decide to adopt a more cautious stance due to economic activity… In practice, this means that the statement and the minutes they can remove the plural when talking about the next movements for interest rates”, said Levante Investimentos in a report to clients.
Earlier, data from the Central Bank showed that economic activity began 2024 with growth well above expectations in January, reinforcing the view that the economy is going through a favorable moment even though it has slowed down compared to the end of last year.
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