Exchange rate: Dollar closes sharply and approaches R$5.20 on the eve of the Fed meeting

The commercial dollar closed down 1.52%, quoted at R$5.19, with investors apprehensive about the message that the president of the Federal Reserve (Fed, the North American central bank), Jerome Powell, must send, after the interest rate decision tomorrow — in Brazil the market will be closed due to the Labor Day holiday. In the month, it fell 3.55%.

Better-than-expected data on employment costs in the US, at a crucial time before the Federal Reserve’s monetary policy decision, also contributed to the rise.

Gabriel Meira, economist at Valor Investimentos, said that the dollar is on the rise, following the employment cost index in the United States and with the market betting on the cuts only starting in 2025.

“This stress is due to increased data in the United States and the market reevaluating the drop in interest rates in the United States; the market had already been changing the possibility of a drop since the 1st quarter of 2024, it went to the second, third or fourth quarter and now the market is thinking that there will not be any cuts this year, only in 2025 because the economy remains very strong there ”, he explained.

Real performs unfavorably

The real had the third worst performance among emerging and commodity exporting currencies. The search for dollars was intensified by the closure of the local market the following day, due to the Labor Day holiday.

Inflationary pressures in the US

According to the United States Department of Labor, wages and income increased by 1.1%, and benefits also increased by 1.1% on a quarterly basis. On an annual basis, salaries grew 4.4%, and benefits, 3.7%.

In the private sector, labor costs rose 4.1% on an annual basis, and for public servants, they rose 4.8%. The data suggests inflationary pressures ahead, contributing to the strengthening of the dollar.

Now, most investors only expect a 25 basis point cut in US interest rates this year.

Pay attention to Jerome Powell’s press conference

Attention turns to Fed President Jerome Powell’s press conference following the monetary policy decision. The announcement of the decision will not include a review of the American Central Bank directors’ projections for the interest rate.

*With information from the CMA Agency