The dollar lost strength for the sixth consecutive time after the Federal Reserve cut interest rates by 50 basis points and expectations for Copom (Image: Getty Images/ Canva Pro)
O dollar spot (USDBRL) extended losses for the sixth consecutive trading session with attention focused on interest rate decisions in the United States and Brazil.
In comparison with the real, the US currency ended trading at R$ 5,4617 (-0.48%) this Wednesday (18).
The performance differed from the trend seen abroad. The DXY indicator, which compares the dollar to a basket of six global currencies, closed up 0.15%.
What moved the dollar today?
With attention focused on interest rate decisions in the United States and Brazil, the dollar followed the movements of the stock market.
In the United States, the Federal Reserve (Fed) cut interest rates by 50 basis points, to 4.75% to 5.00%. The magnitude of the reduction was in line with market expectations, according to the CME Group's FedWatch tool.
Furthermore, this was the first reduction since March 2020 and marks the beginning of the monetary easing cycle in the world's largest economy.
“The[Federal Open Market Committee]has gained increased confidence that inflation is moving sustainably toward 2 percent and judges that the risks to achieving its employment and inflation goals are roughly balanced,” the Fed said in a statement.
During the press conference, the chairman of the US Federal Reserve, Jerome Powell, said the monetary authority did not “wait too long” to reduce its basic interest rate.
“We don’t think we’re overdue” on the need to cut rates given the outlook, Powell said. “We’ve been very patient” with monetary policy and “we’ve waited, and I think that patience has paid dividends” in the form of a convincing decline in inflation.
In Inter's assessment, the Federal Reserve did not give a guidance more firm about upcoming decisions, leaving the possibilities open to move faster or slower towards the rate seen as neutral.
“As expected, the decision implies a global weakening of the dollar, which should take some of the pressure off Copom and increase the likelihood of a smaller upward cycle than expected by the market,” said André Valério, senior economist at Inter, in a note.
It is worth remembering that the more the Fed cuts interest rates, the worse it is for the dollar, which becomes comparatively less attractive as Treasury yields fall, generating risk appetite in other markets with higher interest rates, such as Brazil.
On the domestic front, investors await the decision of the Monetary Policy Committee (Copom).
After the Fed, the Brazilian curve priced in a 99% probability of a 25 basis point hike in the Selic base rate this Wednesday and only a 1% chance of a 50 basis point increase. The previous day, the percentages were 91% and 9%, respectively.
In practice, investors have practically erased from the curve the bets that the Central Bank will raise the Selic, currently at 10.50% per year, by 50 basis points.
*With information from Reuters