President Luiz Inácio Lula da Silva’s temporary halt in criticism of the Central Bank coincided with a drop in the dollar against the real, falling below R$5.60. The decline was influenced by an upcoming government meeting to address the confidence crisis and discuss fiscal policies. Despite rumors of Central Bank intervention, the dollar closed 0.22% higher, marking the highest close since January 10, 2022. Finance Minister Fernando Haddad affirmed the Central Bank’s autonomy in managing the exchange rate. As the commercial dollar fell 1.71% to R$5.568, markets reacted positively to Lula’s commitment to fiscal responsibility.
Economic Insights
Market uncertainties about Brazil’s fiscal trajectory led to the dollar’s rise against the real. The potential increase in the Selic rate to control inflation and Lula’s plan to discuss the exchange rate with key ministers also influenced market sentiment. Economist Paulo Gala noted a calmer market state, expecting government measures to curb the dollar’s rise amidst a confidence crisis. Additionally, U.S. economic data, including lower private sector job creation and concerns about labor market deterioration, contributed to the dollar’s weakening. The Federal Reserve’s meeting minutes suggested potential interest rate cuts, impacting global exchange rates.