President Luiz Inácio Lula da Silva’s decision to pause criticism of the Central Bank coincided with a decline in the dollar against the real, dropping below R$5.60. Anticipation of a government meeting to address the confidence crisis and discuss fiscal policies also influenced this decrease. Despite rumors of Central Bank intervention in the currency market, the dollar closed 0.22% higher at R$ 5.6665, marking its highest close since January 10, 2022.
Finance Minister Fernando Haddad affirmed the Central Bank’s autonomy in exchange rate actions, expressing confidence in the dollar’s stabilization. The commercial dollar fell 1.71% to R$5.568, with the August futures dollar contract dropping 2.03% to 5,581 points on B3. Further market uncertainties about Brazil’s fiscal trajectory may prompt the Central Bank to raise the Selic rate to curb inflation.
Lula’s commitment to fiscal responsibility was well received by the markets, with economist Paulo Gala noting a calmer market atmosphere. U.S. economic data also contributed to the dollar’s weakening, with potential interest rate cuts suggested by Oxford Economics starting in September.