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The dollar surpassed R$6,00, reaching historic levels and generating apprehension in Brazil. Factors such as US monetary policy, Brazil's fiscal situation and the deficit in external accounts contributed to this rise. The Bank's interventions
In an increasingly volatile global economic scenario, the dollar exchange rate has been a sensitive thermometer of the uncertainties that permeate the Brazilian financial market.
Recently, the US currency reached historic levels, surpassing the R$6,00 mark and generating apprehension among investors, businesspeople and ordinary citizens.
But what is behind this rise in the dollar? What are the factors driving this appreciation and how does it affect the daily lives of Brazilians?
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Factors driving the rise of the dollar
The appreciation of the dollar against the real is not the result of a single isolated factor, but of a confluence of elements that, together, put pressure on the foreign currency's exchange rate.
United States monetary policy
The decisions of the Federal Reserve (Fed), the central bank of the United States, have a direct impact on the currencies of emerging countries, including Brazil.
In December 2024, the Fed signaled that interest rate cuts could be slower than expected, which would tend to strengthen the dollar and attract capital to the US at the expense of emerging markets.
Brazilian tax situation
On a domestic level, the lack of significant announcements about spending cuts by the Brazilian government has generated distrust among investors.
Changes in fiscal targets have rekindled fears about the sustainability of public accounts, boosting the dollar.
The absence of concrete measures to contain the fiscal deficit increases the perception of risk, leading investors to seek refuge in stronger currencies.
Deficit in external accounts
Brazil is facing a growing deficit in its external accounts, which has reached 2,07% of GDP. This imbalance puts pressure on the local currency, as it indicates that the country is spending more in foreign currency than it earns, increasing the demand for dollars and, consequently, their exchange rate.
Central Bank interventions and their effects
To contain the rise of the dollar, the central bank Brazil has been intervening in the foreign exchange market, using instruments such as dollar auctions and foreign exchange swaps.
In December 2024, the monetary authority announced auctions of up to US$4 billion to try to stabilize the currency.
However, these measures have proven to be of limited effectiveness. Although the Central Bank uses instruments such as currency swaps and interest rate adjustments to try to stabilize the currency, the interventions have not been able to consistently contain the rise of the dollar.
The floating exchange rate regime adopted by Brazil allows exchange rates to fluctuate freely, without fixed targets set by the Central Bank. In addition, the lack of a clear and rapid response to market conditions has made it difficult to effectively control the exchange rate.
Impacts on the Brazilian economy
The rise of the dollar has direct and indirect effects on the Brazilian economy, affecting everything from the price of imported products to inflation and investments.
Inflation and cost of living
The rise in the dollar makes imported products and inputs used in national production more expensive, putting pressure on inflation.
Specifically, food inflation is what the population is likely to feel the most in the coming months. In addition, there is the price of industrial goods, which, even though they are produced here, have imported components.
Business sector and investments
Companies that depend on imported inputs face increased costs, which can reduce profit margins or be passed on to the end consumer.
Furthermore, exchange rate volatility generates uncertainties that can postpone investments and affect companies' strategic planning.
Future perspectives and final considerations
The exchange rate's resistance to returning to below R$6 reflects the deterioration in expectations regarding the economy Brazilian after the announcements of adjustments in expenses and proposals for reform in Income Tax.
This is clear in the latest editions of the Focus Bulletin, which present significant revisions in the main indicators.
To contain the rise of the US currency, the Central Bank often takes action and sells dollars. However, the initiatives have been limited.
Although the Central Bank uses instruments such as currency swaps and interest rate adjustments to try to stabilize the currency, the interventions have not been able to consistently contain the rise of the dollar. The floating exchange rate regime adopted by Brazil allows rates to fluctuate freely, without fixed targets established by the Central Bank.
Furthermore, the lack of a clear and rapid response to market conditions has made it difficult to effectively control the exchange rate.
The rise of the dollar is likely to impact the lives of Brazilians. The consequences may take a while, but inflation is an obvious trend.
Specifically, food inflation is what the population is likely to feel the most in the coming months. In addition, there is the price of industrial goods, which, even though they are produced here, have imported components.
In short, the rise of the dollar is the result of a combination of internal and external factors that reflect the weaknesses and challenges of the Brazilian economy.
Understanding these elements is essential so that investors, businesspeople and citizens can prepare and adapt to changes in the economic scenario.
