Dollar closes below R$6 for the first time this year.

By Fabricio de Castro

SAO PAULO (Reuters) - The dollar closed Wednesday sharply lower against the US dollar, below 6,00 for the first time since December of last year, as the market eliminated risk premiums from prices and triggered stop-loss orders, amid perceptions that the new US government will be moderate in imposing tariffs on foreign products.

The spot dollar closed down 1,41%, at 5,9463 reais -- the lowest rate since November 27, 2024, when it closed at 5,9141 reais. The currency had not ended the day below 6,00 reais since December 11.

In January, the dollar has accumulated a decline of 3,77%.

At 17:15 PM on the B3 exchange, the dollar for February – currently the most liquid contract – was down 1,33%, at 5,9565 reais.

The dollar started losing ground against the real early in the session, with investors clinging to news that the Donald Trump administration will not adopt new import tariffs initially, even though the US president threatened China with a 10% tariff on February 1st and Mexico and Canada with a 25% tariff by February 1st.

The prospect of relatively low tariffs supports the view that US inflation may not be as pressured, which would allow the Federal Reserve to adopt lower interest rates in the future. The result would be a weaker dollar against the currencies of emerging markets and commodity exporters, such as the Brazilian real.

“After the first few days of Trump’s new term in the United States, the market has become more comfortable assuming that the president’s rhetoric will be firmer than his actions,” said Paula Zogbi, Research Manager at Nomad, in a comment sent to clients.

"With some delay in presenting concrete measures related to some of the campaign promises, risk assets began to price in a more benign scenario."

In Brazil, this translated into lower DI (Interbank Deposit) rates and a drop in the dollar to below 6,00 reais -- an important technical and psychological factor that had been supporting exchange rates.

An operator interviewed by Reuters pointed out that the dollar for February -- the most traded and, ultimately, the one that drives prices in the spot market -- saw stop orders triggered when it reached 5,5990 reais and, after that, 5,5945 reais.

At these technical points, investors who had bought (positioned for rising prices) closed some positions, amplifying the fall in the currency in the futures market and, consequently, in the spot market.

Thus, after reaching a high of 6,0213 reais (-0,17%) at 9:22 am, still early in the session, the spot dollar hit a low of 5,9163 reais (-1,91%) at 13:53 pm.

Professionals interviewed by Reuters, however, considered that maintaining the dollar below 6,00 reais in the short term will depend not only on external news, but also on the ability of the Lula government to convince the market that fiscal adjustment is viable.

“The government’s agenda includes additional measures to contain spending, but there is also the income tax reform – which is a meritorious discussion, but the way it was presented created aversion to the topic,” pointed out Matheus Spiess, analyst at Empiricus Research.

In a morning radio interview, the National Treasury Secretary, Rogério Ceron, said that the government is assessing the changes to the spending cuts approved by Congress at the end of last year. According to him, new proposals will be presented if necessary.

Also in the morning, the Central Bank sold, in its daily operation, 15.000 traditional currency swap contracts for the purpose of rolling over the maturity of March 5, 2025.

In the afternoon, the Central Bank reported that Brazil recorded a total negative exchange rate flow of US$3,804 billion in January up to the 17th, resulting from net outflows of US$2,127 billion through the financial channel and a negative balance of US$1,677 billion through the commercial channel.

In just the last week, from January 13th to 17th, there were total net inflows of $806 million -- a reversal from the previous week, when a net outflow of $1,104 billion left the country.

At 14:17 PM, the dollar index -- which measures the performance of the US currency against a basket of six currencies -- was down 0,01%, at 108,130.