Real Rebounds Before Profit-Taking On Friday, Driven By Diverging Central Bank Policies

(MENAFN- The Rio Times) The US dollar eased against the Brazilian real on Thursday, with USD/BRL dipping to a session low of 5.2949, its strongest intraday level since June 2024.

Investors drove the real higher after Brazil's central bank held the Selic rate at 15%-its highest since 2006-while the Federal Reserve cut rates by 25 basis points to 4.00–4.25%. The resulting 1,000-basis-point yield gap fueled foreign inflows into Brazilian assets.

Early Thursday, initial US jobless claims fell by 33,000 to 231,000, reversing prior-week distortions from fraudulent filings in Texas. That drop offered temporary support to the dollar, but USD/BRL still closed the session at 5.3100, above its intraday trough.

Technical signals on the 1-day chart highlight the real's brief surge. The pair pierced the 5.30 psychological barrier on Thursday, as the 20-day simple moving average crossed below the 50-day average.

The Relative Strength Index fell toward 32, signaling a near-oversold dollar condition. Bollinger Bands narrowed, reflecting reduced volatility after earlier range expansions.



The Global Liquidity Index (yellow line) continued its downward trend, underscoring tighter dollar supply. On Friday, profit-taking emerged. USD/BRL opened near Thursday's close and traded between 5.3050 and 5.3320 before settling at 5.3050.

Volume on Friday remained lighter, suggesting cautious positioning ahead of next week's macro releases. Brazil's inflation remains elevated at 5.1%, well above the 3% target, justifying the central bank's hawkish stance but weighing on credit and consumption.

Annual credit card rates exceed 230%, constraining household borrowing. Meanwhile, unemployment hit a multi-year low of 5.6% in July, supporting domestic spending.

Fiscal pressures add complexity. Government interest payments absorb 7.6% of GDP, and the public-debt ratio rose to 76.6% by June. Despite a primary surplus early in 2025, fiscal balances slipped back into deficit as revenue growth slowed.

Key technical levels to watch include resistance at 5.3150 and 5.3570, and support at 5.2900 and 5.2600. Continued real strength depends on sustained yield differentials. However, stronger US data or a more hawkish Fed could quickly reverse the real's recent gains.

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