The US dollar strengthened on Monday, closing at R$5.5353, a 0.26% increase against the Brazilian real. This increase followed global trends, with the DXY index rising by 0.15%. Investors were anticipating inflation data from both Brazil and the US.
Last week, the dollar had hit a low of R$5.42 after monetary policy decisions. The Federal Reserve cut rates by 50 basis points to 4.75%-5.00%, while Brazil’s Central Bank raised the Selic rate to 10.75%, widening the interest rate gap between the two countries.
Foreign investors found the Brazilian currency more attractive due to this gap. However, domestic factors caused the real to lose ground.
Economists now predict a year-end Selic rate of 11.50%, with expectations of a 50 basis point hike at the next meeting. Inflation projections have also increased for the tenth consecutive week.
Brazil’s Fiscal Situation and Market Reactions
The federal government announced a budget freeze of R$2.1 billion, reducing spending containment to R$13.3 billion. Dario Durigan from the Ministry of Finance expressed concern about perceptions of fiscal management.
Investors await upcoming inflation and GDP data from both Brazil and the US.
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