Dollar hits new lows ahead of US employment data

By Luana Maria Benedito

SÃO PAULO (Reuters) – The dollar fell against the real on Friday as the market awaited U.S. employment data, moving to a strong weekly low after hopes of a PEC cut and signs of moderation by the U.S. central bank. The pace of the bank’s cash crunch has supported investors’ risk appetite in recent days.

At 10:13 a.m. (Brasilia time), the spot dollar retreated 0.13% to sell at 5.1908 reais, below last week’s steady 5.4079 reais.

In B3, the dollar futures contract for the first month fell 0.31%, to 5.1985 reais.

Despite the apparent good mood in the domestic market, “the payroll” will dictate the course of play for the rest of the session,” said Jefferson Rugic, executive chairman of Correparti Corretora, referring to the job creation data. The U.S. Department of Agriculture abroad, scheduled for release at 10:30 a.m. (Brasilia time).

The U.S. economy is expected to add 200,000 jobs in November, according to a Reuters poll. A reading in line with or below expectations should reinforce expectations that the Federal Reserve will ease the pace of its monetary tightening from this month’s meeting, putting pressure on the dollar globally.

The upside surprises, however, could dampen expectations for more dovish behavior by the U.S. central bank, experts warned, which would support the U.S. currency.

The dollar was on track to close the week down 4% against the real, marking the most aggressive depreciation on this month-to-month basis.

Investors attributed the recent lows to modest interest rate hikes in the US and expectations that the transition PEC will be scaled back during Congress.

As filed in the Senate earlier this week, the PEC exempts nearly 200 billion reais from the spending ceiling rule over four years, mostly to fund the Bolsa Familia.

Despite the prospect that the clause will be scrapped, Genial Investimentos warned in a note to clients that with a better understanding between the chamber and the new government, a divestment cost “more than plausible” is likely to return to the agenda. Again, the company is negatively rated for Brazilian assets.