Dollar surpasses R$5 with caution on Fed and ahead of US inflation data By Reuters

By Luana Maria Benedito

SÃO PAULO (Reuters) – The price advanced and surpassed 5 reais again this Thursday, reflecting tough speeches from a Federal Reserve official and expectations for important inflation data from the United States, while investors digested the Central Bank’s Inflation Report.

At 10:05 am (Brasília time), the dollar in cash rose 0.4%, to 5.0002 reais on sale. At B3 (BVMF:), the first maturity contract rose 0.01%, to 4.9935 reais on sale.

The day before, Fed Director Christopher Waller said that recent disappointing inflation data confirms that the US central bank should postpone a short-term interest rate cut.

“This boosts the dollar, which gains from its peers and emerging currencies and those linked to commodities,” said Guilherme Esquelbek, from Correparti Corretora.

According to Esquelbek, this Thursday’s session tends to be more volatile due to the fight over the formation of the end-of-month Ptax rate. Ptax is an exchange rate calculated by the Central Bank that serves as a reference for the settlement of futures contracts. At the end of each month, financial agents usually try to direct it to levels that are more convenient for their positions, whether they are bought or sold in dollars.

Investors’ focus remained on US inflation data scheduled for the end of this week, when markets in much of the world will be closed for Good Friday.

The expectation is for the PCE index to rise 0.3% in February over the previous month and 2.8% on an annual basis, with analysts saying that any higher number will be considered a setback for bets on an interest rate cut by the Fed in June.

“The highlight of the morning is due to a strong dollar movement in the world… the currency market seems to be starting to price in, albeit timidly, a scenario in which European Central Banks begin an interest rate cut cycle before from the Fed,” wrote Dan Kawa, partner at We Capital.

Recently, several authorities at the European Central Bank (ECB) have said that there are clear signs of a slowdown in inflation, which should allow monetary policy to be eased soon.

The longer the Fed remains with high interest rates while other countries — such as Brazil — cut their base rates, the more the dollar tends to benefit globally.

In Brazil, the Central Bank improved its projection of economic growth in 2024 to 1.9%, against a level of 1.7% estimated in December, according to the Quarterly Inflation Report released this Thursday, which also presented warnings about the evolution of inflation.

Furthermore, IBGE data showed that the country recorded an unemployment rate of 7.8% in the quarter up to February due to the increase in the number of people looking for work, marking the highest rate since August last year.