The dollar lost strength for the seventh consecutive time as investors reacted to monetary policy decisions in Brazil and the US (Image: Getty Images/ Canva Pro)
O dollar spot (USDBRL) extended losses for the seventh consecutive trading session with the market's reaction to the cut in interest rates in the United States and the increase in the Selic rate in Brazil.
In comparison with the real, the US currency ended trading at R$ 5,42427 (-0.69%) this Thursday (19).
The performance differed from the trend seen abroad. The DXY indicator, which compares the dollar to a basket of six global currencies, closed slightly higher by 0.04%.
What moved the dollar today?
The domestic market reacted to the Central Bank's “more aggressive” tone in the announcement of the decision on the basic interest rate.
Yesterday (18), the Monetary Policy Committee (Copom) unanimously decided to raise the Selic rate by 25 basis points, to 10.75% per year, kicking off a 'mini-cycle' of monetary tightening.
In the statement, the Committee stated that “the scenario, marked by resilience in activity, pressures in the labor market, a positive output gap, rising inflation projections and unanchored expectations, demands a more contractionary monetary policy”.
The board also considered that “the pace of future adjustments in the interest rate and the total magnitude of the cycle now initiated will be dictated by the firm commitment to convergence of inflation to the target and will depend on the evolution of inflation dynamics”.
With this entire scenario presented by Copom, financial agents' bets on a 50 basis point increase in the Selic rate at the November meeting increased.
Furthermore, the appreciation of commodities boosts emerging currencies, such as the real.
Abroad, interest rates in the United States are heading in the opposite direction.
The Federal Reserve (Fed) cut interest rates by 0.50 percentage points (pp), to 4.75% to 5.00%. The magnitude of the reduction was in line with market expectations, according to 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.
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.
*With information from Reuters