Dollar falls to lowest value in a year: R$ 5,32

(Reuters)- The dollar completed its fourth consecutive session of decline against the real on Monday, closing at its lowest value since June of last year, in line with the retreat of the US currency abroad, amid expectations ahead of the interest rate decisions by the Federal Reserve and the Central Bank of Brazil, both on Wednesday.

The US dollar closed down 0,59% at R$5,3220 -- its lowest value since June 6, 2024, when it closed at R$5,2493. Year-to-date, the dollar has fallen 13,97%.

At 17:03 PM on the B3 exchange, the dollar for October – currently the most liquid in Brazil – was down 0,56%, at R$5,3405.

The US dollar's exchange rate has plummeted since the start of the day, continuing the recent trend, with market participants perceiving that the Fed will cut its interest rate by at least 25 basis points on Wednesday -- possibly even a larger cut of 50 basis points.

Expectations of lower interest rates in the US, coupled with investors' certainty that the Central Bank will maintain the Selic rate at 15% per year, reinforced the assessment that Brazil is attractive to foreign capital, which drove down the dollar.

After reaching a high of R$5,3558 (+0,04%) at 9:00 AM, at the opening, the spot dollar fell to a low of R$5,3092 (-0,83%) at 1:00 PM.

“The movement (of the dollar falling against the real) anticipates the Federal Reserve's decision on Wednesday, for which the market projects a 96% probability of a 0,25 percentage point cut in interest rates, based on recent data showing a cooling of the American economy,” wrote Nickolas Lobo, investment specialist at Nomad.

The fall in the dollar was in line with the strong advance of the Ibovespa and the drop in DI (Interbank Deposit) rates, in a session that was generally positive for Brazilian assets.

With the conviction of former president Jair Bolsonaro by the Supreme Federal Court for attempted coup d'état last week, the market is now focused on possible US retaliation against Brazil as a result of the trial's outcome.

In July, US President Donald Trump justified a 50% tariff on Brazilian products, citing, among other things, the trial of Bolsonaro, his ally. Furthermore, at the end of July, the US applied the Magnitsky Act – which limits financial transactions within US jurisdiction – against Supreme Court Justice Alexandre de Moraes, the rapporteur in the case against Bolsonaro. Following the trial, no further measures have been announced so far.

At 10:17 PM, the dollar index -- which measures the performance of the US currency against a basket of six currencies -- was down 0,36%, at 97,306.