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Dollar soaring: understand the reasons behind the rise of the American currency!

Written by Alisson Ficher
Published 19/06/2024 às 01:20
Dollar soars above R$5,40 due to high interest rates in the USA and fiscal uncertainties in Brazil, driving away investors and putting pressure on inflation. (Image: reproduction)
Dollar soars above R$5,40 due to high interest rates in the USA and fiscal uncertainties in Brazil, driving away investors and putting pressure on inflation. (Image: reproduction)

The dollar continues on an upward trend, surpassing the R$5,40 mark in recent weeks. This movement is not random and has brought bad consequences for Brazilians, such as an increase in inflation and, consequently, the price of countless products.

According to experts, this increase has been driven by two main factors. The first is the restrictive monetary policy in United States and the second is the fiscal uncertainties currently experienced in Brazil.

Restrictive monetary policy in the United States

In the United States, monetary policy remains focused on containing inflation and strengthening the American economy, which is booming, with a robust job market and disposable income for the population. There, interest rates are high, between 5,25% and 5,50% per year.

According to the G1 portal, experts point out that the current situation, combined with the expectation that American interest rates will only start to fall in the last quarter of 2024, makes the country's public bonds more attractive to investors.

Because of this, there has been a migration of capital to the USA, which increases the demand for dollars and increases their value in relation to other currencies, such as the Brazilian real.

Tax uncertainties in Brazil

Fiscal risk in Brazil intensifies, generating market distrust in the government's ability to reduce expenses and meet fiscal targets.

This uncertainty is caused by the change in the fiscal target for 2025, from surplus to zero deficit, which scares away foreign investment and puts pressure on the real.

This caution with Brazilian fiscal scenario it also impacts expectations for the Selic rate, the economy's basic interest rate.

Analysts, also according to the website mentioned, predict that the Central Bank of Brazil (BC) will maintain the Selic rate at 10,50% per year at the next meeting of the Monetary Policy Committee (Copom), scheduled for June 19.

Prospects for Inflation in Brazil

This perspective, combined with the deterioration of the fiscal framework, reduces investment projections in production in the country. These factors lead to an increase in inflation.

High interest rates, the devaluation of the real and the slowdown in investments, combined with climate problems that impact agricultural harvests, create an environment conducive to rising inflation in the coming months.

For experts, this scenario requires consistent measures from the Brazilian government to restore investor confidence, contain inflation and boost economic growth.

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Alisson Ficher

Journalist graduated since 2017 and working in the field since 2015, with six years of experience in printed magazines and more than 12 thousand online publications. Specialist in topics such as politics, jobs, economics, courses and others. If you have any questions or suggestions for an agenda regarding any of the topics covered on the site, please get in touch.

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