Economy

Dollar opens higher after Fed signals further interest rate hikes

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The dollar was high against the real shortly after the opening of trading this Thursday (28), following the strengthening of the US currency. Investors reassess the outlook for the Fed’s upcoming interest rate hikes.

At 9:04 am (GMT), the spot dollar advanced 0.38%, quoted at R$ 5.2694 on sale. On B3, at 9:04 am, the dollar futures contract of the first month rose 0.46%, quoted at R$ 5.2715.

The day before, the US currency fell 1.92%, to R$ 5.2493 reais, the lowest level since June 30 (R$ 5.2311).

This Wednesday (27), the dollar lost ground after investors evaluated that the Fed (Federal Reserve, the American central bank) signaled limits for the continuity of its program of progressive interest rate increase, although it applied a new high of 0, 75 percentage point on your rate.

The real was the currency with the greatest appreciation among the main global currencies, in addition to leading gains against the dollar also in comparison with other currencies of emerging economies.

The high interest rates in Brazil explain this result, especially after the cooling off of the expectation of a soaring US rate.

A refuge for investors in times of market turmoil, the dollar tends to fall when investors exchange the security of US fixed income for riskier investments, such as the stock markets. This happened this Wednesday.

In Brazil, the stock exchange benchmark rose 1.67% to 101,437 points. The Brazilian market followed the American one.

On the New York Stock Exchange, the S&P 500 parameter indicator advanced 2.62%. On Nasdaq, which includes stocks in the technology sector and with greater growth potential, there was a 4.06% jump. The Dow Jones, which tracks high-value companies, gained 1.37%.

The Federal Reserve on Wednesday raised its maximum interest rate target to 2.5% per year.

After a 0.75 percentage point increase last month and smaller moves in May and March, the Fed has already raised its key rate by a total of 2.25 points this year.

And in a press conference, the head of the institution, Jerome Powell, said that at some point the magnitude of the interest rate squeeze will decrease, deflating more aggressive high bets.

The focus of the credit crunch is to fight inflation in the United States, which is at 9.1%, the highest in four decades. Signs that the economy may slow to the point of driving the country into a recession, however, raise discussions about the calibration of US monetary policy.

But while little progress has yet been made in the fight against inflation, signs of economic stress are piling up and increasing pressure on Fed members as they assess how much monetary policy needs to be tightened to slow price rises amid risk that going too far could trigger a recession.

with Reuters

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