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Dollar Reclaims Ground Against Real As Fed Caution And Weak Data Weigh On Brazil
(MENAFN- The Rio Times) The dollar started Tuesday trading near R$ 5.33 per $1, holding Monday's gains after a 0.64% jump in the spot rate that broke the real's recent winning streak.
The move mirrors a broader strengthening of the U.S. currency, with the Dollar Index edging higher as investors scaled back hopes of rapid monetary easing in Washington.
What changed the mood was a fresh dose of caution from the Federal Reserve. Vice-chair Philip Jefferson said the central bank should“proceed slowly” with any further cuts, noting that policy is still“a bit restrictive” but now closer to a neutral level.
His comments, echoing earlier warnings from other officials, pushed traders to price slightly greater odds that the Fed will hold rates in the 3.75%–4.00% range at its December meeting rather than deliver another 25-basis-point cut.
Higher-for-longer U.S. rates tend to favour the dollar and punish higher-yielding emerging currencies. The backdrop is complicated by the record 43-day U.S. government shutdown, which has delayed key economic releases.
Markets now await a backlog of data, including the October payrolls report, to gauge whether the Fed's patient approach is justified. Until then, prudence in Washington is being rewarded with a firmer dollar and softer commodities.
Brazil Data Softens as Real Tests Key FX Levels
Brazil's own numbers offered little resistance. The central bank 's IBC-Br activity index fell 0.2% in September from August-twice the expected drop-and contracted 0.9% in the third quarter, even though it remains 3% higher over the past year.
The weaker reading underscores a cooling economy just as global risk appetite turns more selective. The Ibovespa slipped around half a percent on Monday, while the main Brazil equity ETF in New York saw heavier-than-average trading and a modest decline.
Technically, USD/BRL has bounced off the R$ 5.26–5.28 area on the four-hour chart, with momentum and RSI now favouring the dollar.
Yet on the daily chart the pair still trades below a falling 200-day moving average near R$ 5.55, suggesting the broader trend remains gently downward for the U.S. currency.
For now, resistance is clustered around R$ 5.35–5.38, with support at R$ 5.30 and then R$ 5.26-levels that will show whether Monday's move was a short-covering spike or the start of a deeper real correction.
The move mirrors a broader strengthening of the U.S. currency, with the Dollar Index edging higher as investors scaled back hopes of rapid monetary easing in Washington.
What changed the mood was a fresh dose of caution from the Federal Reserve. Vice-chair Philip Jefferson said the central bank should“proceed slowly” with any further cuts, noting that policy is still“a bit restrictive” but now closer to a neutral level.
His comments, echoing earlier warnings from other officials, pushed traders to price slightly greater odds that the Fed will hold rates in the 3.75%–4.00% range at its December meeting rather than deliver another 25-basis-point cut.
Higher-for-longer U.S. rates tend to favour the dollar and punish higher-yielding emerging currencies. The backdrop is complicated by the record 43-day U.S. government shutdown, which has delayed key economic releases.
Markets now await a backlog of data, including the October payrolls report, to gauge whether the Fed's patient approach is justified. Until then, prudence in Washington is being rewarded with a firmer dollar and softer commodities.
Brazil Data Softens as Real Tests Key FX Levels
Brazil's own numbers offered little resistance. The central bank 's IBC-Br activity index fell 0.2% in September from August-twice the expected drop-and contracted 0.9% in the third quarter, even though it remains 3% higher over the past year.
The weaker reading underscores a cooling economy just as global risk appetite turns more selective. The Ibovespa slipped around half a percent on Monday, while the main Brazil equity ETF in New York saw heavier-than-average trading and a modest decline.
Technically, USD/BRL has bounced off the R$ 5.26–5.28 area on the four-hour chart, with momentum and RSI now favouring the dollar.
Yet on the daily chart the pair still trades below a falling 200-day moving average near R$ 5.55, suggesting the broader trend remains gently downward for the U.S. currency.
For now, resistance is clustered around R$ 5.35–5.38, with support at R$ 5.30 and then R$ 5.26-levels that will show whether Monday's move was a short-covering spike or the start of a deeper real correction.
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