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Brazil’S Real Climbs Against Dollar Ahead Of Rate Decisions
(MENAFN- The Rio Times) In a day marked by shifting monetary policies, the U.S. dollar weakened against the Brazilian real, closing at R$ 5.5817, a slight decrease of 0.15%.
This movement diverged from the global trend where the DXY index, measuring the dollar against six major currencies, rose by 0.44%.
This currency shift occurred despite the rise in commodity prices, which typically pressures emerging market currencies.
The Real's strength is attributed to market expectations of a U.S. interest rate cut and a potential increase in Brazil's Selic rate.
In addition, both the Federal Reserve and the Brazilian Central Bank will announce key policy decisions next Wednesday.
Economic projections in Brazil are upbeat following a stronger-than-expected economic performance in the second quarter.
According to the latest Focus Bulletin, forecasts for GDP, inflation, and interest rates have all seen upward revisions.
The market now anticipates a 25 basis-point increase in the Selic rate this month, potentially reaching 11.50% by early 2025.
In the U.S., the focus remains on upcoming inflation data. The Consumer Price Index (CPI) is expected to show a monthly increase of 0.2% and a yearly rise of 2.6%. This data could recalibrate expectations for the Federal Reserve 's next moves.
The likelihood that interest rates will adjust to between 5.00% and 5.25% is currently 71%. Meanwhile, the chance of a more significant 50 basis-point cut stands at 29%.
If the Federal Reserve lowers interest rates, the U.S. dollar may become less attractive. This is especially true when compared to currencies in higher interest rate environments, such as Brazil.
This could enhance the appeal of the real and other emerging market currencies linked to commodities, despite their generally weaker performance on this day.
This movement diverged from the global trend where the DXY index, measuring the dollar against six major currencies, rose by 0.44%.
This currency shift occurred despite the rise in commodity prices, which typically pressures emerging market currencies.
The Real's strength is attributed to market expectations of a U.S. interest rate cut and a potential increase in Brazil's Selic rate.
In addition, both the Federal Reserve and the Brazilian Central Bank will announce key policy decisions next Wednesday.
Economic projections in Brazil are upbeat following a stronger-than-expected economic performance in the second quarter.
According to the latest Focus Bulletin, forecasts for GDP, inflation, and interest rates have all seen upward revisions.
The market now anticipates a 25 basis-point increase in the Selic rate this month, potentially reaching 11.50% by early 2025.
In the U.S., the focus remains on upcoming inflation data. The Consumer Price Index (CPI) is expected to show a monthly increase of 0.2% and a yearly rise of 2.6%. This data could recalibrate expectations for the Federal Reserve 's next moves.
The likelihood that interest rates will adjust to between 5.00% and 5.25% is currently 71%. Meanwhile, the chance of a more significant 50 basis-point cut stands at 29%.
If the Federal Reserve lowers interest rates, the U.S. dollar may become less attractive. This is especially true when compared to currencies in higher interest rate environments, such as Brazil.
This could enhance the appeal of the real and other emerging market currencies linked to commodities, despite their generally weaker performance on this day.
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