(MENAFN- The Rio Times) Brazil's currency is quietly winning a tug-of-war that most readers outside the country will recognize: when the U.S. Federal Reserve sounds softer, the global dollar softens too-and higher-yielding markets get breathing room.

That is what set the tone into Friday morning in São Paulo, with the dollar trading near 5.44–5.45 reais and the broader dollar index stuck below 99.

The headline move is simple; the backstory isn't. Two strands pulled in the same direction. First, U.S. policy expectations: investors now price another 25-basis-point Fed cut at the end of October after officials signaled comfort with further easing.

Softer U.S. yields tend to push global money toward currencies that still pay a premium. Brazil is one of them-domestic rates are well above inflation-so the“carry” remains attractive.

Second, local fundamentals: Brazil's proxy GDP (IBC-Br) rose 0.4% month on month in August, a touch under consensus. It hints at growth that's positive but cooling, which helps keep a lid on local inflation fears and preserves that rate advantage.


USD/BRL Steadies as U.S.–Brazil Talks Ease Risk
Add tentative signs of U.S.–Brazil tariff talks getting underway, and one source of risk for Brazil-linked assets looks a bit less threatening than a week ago.

There are wildcards. Trade frictions with the U.S. could flare again. Geopolitics-reports of a possible U.S.–Russia meeting on Ukraine-can shift risk appetite fast. And if U.S. data undercut the case for a Fed cut, the dollar 's downswing could reverse.

Technically, the four-hour USD/BRL chart shows a tight range around 5.44 with momentum fading, while the daily chart still caps rallies beneath longer-term averages. Traders are watching 5.41–5.42 as first support and 5.46–5.50 as a ceiling. A clear break either way likely sets the next leg.

The simple version: the dollar is on the back foot, Brazil still offers carry, and policy signals-not just at the Banco Central, but in Washington-are steering the real as much as anything happening on the trading floor.

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