The United States dollar dipped over 1% to under R$5 on Wednesday, reacting to the Federal Reserves decision to keep its base rate steady and project a 0.75 percentage point cut by year-end.Despite expectations of inflation exceeding forecasts, the Feds stance remained unchanged from its December outlook.Ten of 19 officials anticipate at least a 0.75-point reduction in the base rate by the years end.Market watchers expected Fed adjustments favoring the dollar in 2024, but no revisions materialized.The dollar closed 1.14% lower at R$4.9741, marking its largest fall since a 1.53% decrease on November 3 of the prior year.Dollar Falls Below R$5 as Fed Holds Rates.
(Photo Internet reproduction)Renato Campos of Hantec Markets noted Fed signals for 75 basis point cuts in 2024-2025 could weaken the dollar.
He cited increased dollar liquidity and easier credit access as key factors.Fed Chair Jerome Powell, in a recent press briefing, discussed the unexpectedly robust United States inflation data but maintained a stable outlook on price pressures.He underscored the Feds measured response to the recent data, suggesting a careful approach to rate adjustments.Helena Veronese of B.
Side Investments viewed Powells comments as minimizing the impact of recent inflation figures, signaling the Feds readiness to cut rates when feasible.Such early rate reductions by the Fed could expand the interest rate gap between Brazil and the United States This would make the Brazilian real more attractive for carry trade strategies, where investors benefit from the interest rate differences.The Brazilian Central Banks Monetary Policy Committee (Copom) is anticipated to announce a half-point cut to the Selic rate, lowering it to 10.75%.Economists are closely monitoring for any potential changes in the Central Banks future rate cut guidance.