Dollar rises as contingency plan against US tariffs takes center stage.
Investors' attention was once again focused on the trade impasse between Brazil and the United States.
By Fernando Cardoso
SAO PAULO (Reuters) The spot dollar closed slightly higher against the real on Wednesday, recovering some of the previous day's sharp losses, but fluctuating within a narrow range, after the government announced a contingency plan for companies affected by the US 50% tariff, without major surprises.
The spot dollar closed up 0,28%, at R$5,4014.
At 12:17 PM on the B3 exchange, the first-maturity dollar futures contract was down 0,07%, at R$5,425 for sale.
Investors' attention in this session was once again focused on the trade impasse between Brazil and the US. President Luiz Inácio Lula da Silva signed a provisional measure to help exporters, notably including a R$30 billion credit line.
Furthermore, the Planalto Palace reported that R$4,5 billion will be allocated to various guarantee funds and up to R$5 billion in tax credits for exporters. Of the projected expenses, R$9,5 billion are expected to be excluded from the fiscal target calculation.
The aid plan was widely expected by the market, both because of its potential to protect the productive sector and because of concerns about the fiscal impact of the measures. Financial agents feared that the package could compromise the targets for public finances.
However, the provisional measure did not deviate from what had already been anticipated by authorities involved in the matter, such as the Minister of Finance, Fernando Haddad, and the Vice-President, Geraldo Alckmin. Lula himself had already indicated the value of the credit line in an interview on Tuesday.
Therefore, the announcement of the package did not generate much movement in the currency market throughout the day. On the other hand, the market remains wary of the prospects for negotiations between Brazil and the US, since the Brazilian government seems unable to open channels of dialogue with Washington.
A meeting between Haddad and Treasury Secretary Scott Bessent, previously scheduled for Wednesday, was canceled by the U.S. government. The government is seeking to expand the list of exemptions already granted by President Donald Trump to a range of products.
At its highest point of the day, the dollar reached R$5,4104 (+0,45%), at 12:55 PM. At its lowest point, the currency hit R$5,3804 (-0,11%), at 9:36 AM.
The gains for the US dollar in this trading session followed a 1,06% loss the previous day, when it reached its lowest value since June of last year, at R$5,3864.
The recent appreciation of the real is linked to a wave of global dollar weakness, following increased bets that the Federal Reserve will cut interest rates at its next meeting in September, after weak employment data and moderate inflation figures.
In the morning, traders' bets shifted to a 100% chance of a 0,25 percentage point cut in September, shortly after Bessent stated in an interview that he believed a larger reduction of 0,5 percentage points was possible due to weak employment figures.
The dollar index -- which measures the performance of the US currency against a basket of six currencies -- fell 0,21% to 97,828.
Earlier, the Central Bank sold 35.000 traditional currency swap contracts for the purpose of rolling over the maturity date of September 1, 2025.
The regulatory body also reported that Brazil recorded a total positive foreign exchange flow of US$118 million in August up to the 8th.
(Edited by Pedro Fonseca and Alexandre Caverni)
