Exchange rate: Dollar rises in Brazil amid challenging external scenario

The spot dollar started the week with a strong rise in the domestic foreign exchange market, following the wave of appreciation of the American currency abroad. This movement was driven by the rise in rates on Treasuries, United States Treasury bonds.

Robust US industry data released today and the cautious speech by Federal Reserve President Jerome Powell last Friday cast doubt on the magnitude of possible interest rate cuts this year in the US.

With a maximum reached at R$5.0705 in the early afternoon, the dollar ended the session this Monday, April 1st, up 0.87%, quoted at R$5.0591. This is the highest closing level since October 13th of last year (R$5.0885).

Dollar performance and international panorama

After ending the first quarter with gains of 3.34%, already above the technical and psychological barrier of R$5, the dollar showed an initial drop at the opening of business. This was in response to positive data in China and the appreciation of iron ore. However, the currency quickly changed direction, registering successive increases and surpassing the R$5.05 mark around 11 am, in line with the exterior.

Actual performance

The real had the worst performance among its Latin American peers, trailing only the Norwegian krone and the Hungarian guilder when compared to the most relevant emerging currencies and commodity exporters.

Future perspectives and indicators to watch

With the United States industrial PMI indicating expansion of activity for the first time since September 2022, attention now turns to the release of US labor market data in the coming days. Highlight is the official employment report (payroll) for March, to be released on Friday, 5th.

Expectations for the Fed

In an interview with Estadão, Leonardo Monoli, partner and management director at Azimut Brasil Wealth Management, stated that the scenario of strong activity in the USA reduces bets on interest rate cuts by the Fed this year. This leads to the opening of the interest curve in the US and the strengthening of the dollar. He highlights that a more challenging environment arises, especially for emerging countries, if the Fed does not make expected cuts.