the dollar It approached stability in the last stage of trading this Thursday (4), and thus ended the day with a slight decline, following the movement of most emerging currencies. In the morning, the US currency fell below the symbolically important level of R$5.30, but gained strength in the early afternoon. Market participants point to year-end technical hedging moves by major companies, which benefited from the recent decline in the value of the dollar, as one of the reasons that may have put pressure on the Brazilian currency.
The dollar closed trading in the spot market with a decrease of 0.04%, reaching 5.3103 Brazilian riyals. The euro fell 0.22 percent, trading at 6.1869 Brazilian riyals. The DXY index, which measures the dollar’s performance against a basket of six other major currencies, remained close to stability, with a positive change of 0.07%, at 98.927 points. At the lowest level of the day, the dollar was trading at 5.2877 Brazilian reals, and at the maximum it reached 5.3162 Brazilian reals.
During the morning, the dollar’s depreciation against the riyal intensified as market participants monitored US economic indicators and bet on the Federal Reserve’s monetary policy dynamics. However, the move reversed in the early afternoon and the US currency showed a slight appreciation against the real.
From the point of view of Treasury Director at Travelex Bank, Markus Wigt, a movement has been observed for companies taking advantage of the steady decline in the dollar to adjust their positions and create a “hedge” (protection) for some positions. “We have seen large companies looking to cover their liabilities in currency, especially dollars. We have also seen companies that had payments due at the end of the year and have already made contributions to these operations now,” he adds.
The Treasurer stated that the main driver for the dollar through the end of the year will be pricing in new interest rate cuts in the US. “The dollar will not reverse all these declines; it is also a trend towards diversification of currencies, geographies and risks.”
Feigt’s view is consistent with the assessment of the Dutch bank ING, for which data coming from the US economy should justify two additional cuts at the beginning of next year, which supports expectations that the dollar will not recover even in the first quarter, which is “seasonally favorable.” Federal funds futures are pricing in an 87% probability of a 0.25 point cut at the US central bank’s next meeting on December 10, according to data from CME Group.
In addition to the Fed, Travelex Treasury Director notes that changes to the earnings tax law also help ease concerns about the intensification of the outflow of dollars out of the country at this time of year. Today, Tuesday (2), the Senate Economic Affairs Committee approved a draft law that maintains the exemption from stock dividends calculated until the end of the current year, the distribution of which was approved until April 30, 2026, amending the law that was recently approved.
“The dollar movement in Brazil was largely due to this extension of the April dividend. This provided a big relief. What was supporting the dollar here was the expectation of a stronger (dollar) flow at the end of the year, as it always happens – which, with this change in IR, could be stronger this year. This deadline extension was very important to relieve the pressure,” says Weigt.