Dollar rises 1.5% in the session before holidays and Fed decision; currency advances 3.5% in the month

The dollar closed with a strong rise against the real and approached R$ 5.20, in line with the firm advance of the currency abroad following positive economic data in the USA and before the Labor Day holiday in Brazil, on Wednesday, when The Federal Reserve’s (Fed) monetary policy decision will also be announced.

What is the dollar exchange rate today?

The spot dollar closed up 1.52%, at R$5.192 for purchase and R$5.193 for sale, the highest closing price since April 19 of this year. At 5:30 pm, the first-month dollar futures contract rose 1.01%, equivalent to R$5,172 points. In April, the US currency accumulated an increase of 3.53%.

Commercial dollar

Sale: R$5,193

Purchase: R$5,192

Tourism dollar

Sale: R$ 5.40

Purchase: R$ 5.22

Read more: Types of dollars: find out the main ones and the importance of the currency

The American currency closed sharply higher, with investors cautious ahead of the monetary policy decision in the USA and a holiday in Brazil tomorrow. Higher-than-expected employment cost data in the US led to a global strengthening of the US currency and a firm rise in Treasury rates.

The real had the third worst performance among emerging currencies and the most relevant commodity exporters. Operators claim that the search for dollars was boosted by the fact that the local market is closed tomorrow, due to the Labor Day holiday. Any signals from the Fed about the direction of American interest rates will only be absorbed by domestic assets on Thursday, the 2nd.

The Fed began its two-day monetary policy meeting on Tuesday, where market players expect it to keep rates between 5.25% and 5.5%, with US inflation remaining strong.

“The future of interest rates remains uncertain, and volatility in the markets should persist at least until (Fed Chair Jerome) Powell speaks out,” Diego Costa, head of foreign exchange for the North and Northeast at B&T Câmbio, told Reuters.

Money markets expect the US central bank to keep interest rates at their current range of 5.25% to 5.50% at the end of its two-day meeting on Wednesday. Traders are pricing in just about 35 basis points of rate cuts by the Fed this year, down from about 150 basis points estimated in early 2024, according to LSEG data.

The reduction in US monetary easing expectations came after a series of resilient economic and inflation data, which in turn led to a sharp reversal in global risk appetite in April, although the mood improved somewhat towards the end of the month.

The dollar jumped 3.53% against the real in the month, marking the strongest monthly gain since August last year (+4.72%).

Although operators associated much of the domestic exchange rate depreciation with international uncertainties, especially coming from the Fed, a worsening in the perception of Brazil’s fiscal risk was also pointed out, after the government relaxed the 2025 primary result target.

Costa, from B&T, drew attention to the fact that this trading session features the Ptax formation from the end of April, which tends to make morning negotiations more unstable.

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.

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(With Reuters)