MercoPress. South Atlantic News Agency

Brazil: Dollar plunges to lowest level since November

Brazil's economy was a mirror of announcements by the new Trump administration in Washington

The US dollar fell Wednesday below R$ 6 following Donald Trump's second inauguration this week in Washington DC, thus reaching its lowest level since November. Meanwhile, the stock market fell for the first time after three straight rises. The commercial dollar closed Wednesday at R$ 5.946 after hitting R$ 5.91 around 2 pm. So far this year, the US dollar went down by 3.79%.

The stock market had a more volatile day. B3's Ibovespa index closed at 122,972 points, down 0.3%. The indicator alternated ups and downs but consolidated its downtrend later in the afternoon, driven by mining companies.

With no relevant news on the Brazilian economy, the dollar was influenced by the international market, unlike in recent weeks when the local scene was gripped by Finance Minister Fernando Haddad's fiscal package cutting public spending and capping some social benefits, military pensions, and the so-called “super-salaries” of some officials, among other adjustments. Donald Trump's electoral win also caused a stir amid fears of tariffs on Brazilian products, which has so far not happened.

Haddad's fiscal adjustment package was expected to be an antidote to the rising dollar and growing investor distrust. However, it was deemed as “palliative and insufficient” to contain the country's fiscal imbalance.

Hence, the absence of announcements of higher tariffs for Latin American emerging countries as opposed to a 10% surcharge on products from China and 25% on those from Mexico and Canada effective on Feb 1, resulted in lesser pressure on US inflation, thus reducing the need for the Federal Reserve to freeze or raise interest rates this year. During the election campaign, Trump promised higher tariffs on Chinese products.

Lower interest rates in advanced economies benefit emerging countries like Brazil because high interest rates in the Brazilian economy attract financial capital, reducing pressure on the dollar and the stock market. (Source: Agencia Brasil)