After an improvement in interest rate projections in the US, will the dollar fall below R$5 again?

After the dollar dropped below R$5.05 during business this Friday, the 3rd, experts say that there is room for the exchange rate to break the R$5 barrier in the short term.

+ Fed maintains interest rates in the US in the range of 5.25% to 5.5%, as expected by the market

The drop in the dollar comes in the wake of the release of data on the United States economy that reinforced the expectation of a cut in interest rates in the country. The movement follows the mood of the local market after the agency Moody’s improved the outlook for Brazil’s credit rating. See quotes.

Now, experts monitor volatility.

“At its current level, the dollar would need to fall by around 1.40% to reach R$5, it is not such a significant variation that it cannot occur, especially in the case of short-term scenarios with a lot of volatility like what has currently been the case. ”, says Ana Paula Carvalho, financial planner and partner at AVG Capital.

For this to happen, one of the main factors would be the external scenario. The market should closely monitor the release of the next inflation figures in the United States, looking for clues about the next steps of the Federal Reserve (Fed, the North American central bank).

“If the expectation of an interest rate cut there is established more smoothly by the end of the year, we would have a more valued real. This could push the dollar below R$5”, comments Cristian Pelizza, chief economist at Nippur Finance.

This Friday, data from the United States labor market was released, in the report known as “payroll”. The numbers indicated that job creation slowed more than expected in April and annual wage gains slowed, as reported by the Department of Labor.

“Today’s lower-than-expected labor market data was positive for the Fed”, says Guilherme Morais, analyst at VG Research, highlighting, however, “a sequence of good labor and inflation data is still needed”.

“The thesis that the economy is gradually slowing down, providing room for a cut in interest rates, is positive and the perception of lower risk could mean that the dollar returns below R$5”, says Morais.

Danilo Igliori, chief economist at Nomad, believes that maintaining the “moderately optimistic scenario” of the market in recent days, both externally and internally, “would be compatible with the return of the exchange rate to close to R$5”.

Questions on the radar

Furthermore, another point of observation for the financial market is the Brazilian fiscal scenario. In this context, Ana Paula Carvalho points to an environment of strong uncertainty, even after the optimism generated by Moody’s decision.

“Uncertainties regarding our fiscal scenario have caused the market to have a greater aversion to investments in the country. All of these factors negatively influence the flow of currency,” she says.

Therefore, the forecast for the dollar below R$5 is not unanimous. “It doesn’t seem very likely due to external restrictions linked to the behavior of interest rates in the US, because we believe that activity will remain strong”, says Alejandro Ortiz, economist at Guide Gestão.

Andre Fernandes, head of variable income and partner at A7 Capital, draws attention to another important point: the prospects for the entry of dollars into the Brazilian market. “We could see the dollar below R$5 again with a possible reversal of the sales flow by foreign investors, which already reaches more than R$30 billion on our stock exchange in 2024, and major improvements in public accounts. Without this, the dollar will hardly go back below R$5 this year.”