Fear with the US Central Bank causes the currency to close at the highest value since October 13th

The spot dollar started the week with a strong rise in the domestic exchange market, following the wave of appreciation of the US currency abroad, amid an increase in Treasury rates. Strong data from the United States industry released this Monday, added to the cautious speech by the president of the Federal Reserve (Fed, the North American central bank), Jerome Powell, last Friday, the 29th, cast doubts on the magnitude of possible cycle of interest cuts this year in the USA.

After ending the first quarter with gains of 3.34%, already above the technical and psychological barrier of R$5.00, the dollar even experienced a drop at the opening of business with positive data in China and the appreciation of iron ore. But the currency quickly changed its sign and, with successive increases, surpassed the R$5.05 range around 11 am, in line with the exterior.

With a high of R$ 5.0705 in the early afternoon, the dollar ended this Monday’s session, 1st, up 0.87%, quoted at R$ 5.0591 – highest closing level since October 13th of the year past (R$ 5.0885).

The real had the worst performance among its Latin American peers. In comparison with emerging currencies and those of the most relevant commodity exporters, the Brazilian currency suffered less only than the Norwegian krone and the Hungarian guilder.

“Stronger activity numbers came out in the US and inflation there is still resilient. Here, the technical outlook has been bad for some time, with most funds still very ‘sold’ in dollars. The real has been performing worse than the Mexican peso for some time and today it has suffered a stronger loss”, says the head of Treasury at Travelex Bank, Marcos Weigt, highlighting that Mexico offers investors similar interest rates to Brazil, but it has much lower public debt in relation to GDP.

Released at the end of the morning, the United States industrial PMI prepared by the Institute for Supply Management (ISM) rose from 47.8 in February to 50.3 in March, above analysts’ forecasts (48.5 ). With a reading above 50, the indicator began to reflect expansion in activity for the first time since September 2022. Attention now turns to the release of labor market data in the US in the coming days, with emphasis on the official employment report (payroll) of March, on Friday, 5th.

The partner and managing director of Azimut Brasil Wealth Management, Leonardo Monoli, states that, due to the strength of activity in the USA, bets around the magnitude of interest rate cuts by the Fed this year are reduced, which leads to the opening of the interest curve in the USA and the strengthening of the dollar.

“There are already less than 75 basis points of cuts priced for this year. This is an environment that is beginning to show a much greater deviation from the central scenario projected by the market at the turn of the year, when there was risk allocation in view of the expectation of a stronger movement of cuts by the Fed”, says Monoli. “With the US economy still strong, the tail risk of no cuts this year is starting to gain more weight. A more challenging environment is emerging ahead, especially for emerging countries”