The Brazilian real pared intraday losses to close above 5.10 per dollar on Thursday, as the U.S. currency recovered from a sharp decline driven by falling Treasury yields and shifting domestic political sentiment.
The spot dollar fell 0.04% to R$5.1043, paring a 0.71% intraday drop that took it to a session low of R$5.0702 at 9:32 a.m. local time. The greenback had earlier hit an intraday high of R$5.1147 at 1:22 p.m. following a late-morning intervention by Brazil’s central bank, which sold 50,000 swap contracts to roll over October 1 maturity obligations. The central bank’s move capped the decline amid broader dollar weakness globally.
The U.S. Dollar Index fell 0.61% to 98.988, as comments from Federal Reserve Director Christopher Waller signaled potential support for holding U.S. interest rates steady if inflation pressures continue to ease. The dollar also weakened sharply against the Japanese yen on rising expectations that the Bank of Japan may hike rates to address inflationary pressures.
Domestically, the real strengthened earlier in the session after a Quaest poll showed a narrowing gap in voting intentions between President Luiz Inácio Lula da Silva and Senator Flávio Bolsonaro in a potential second-round runoff. The two candidates were technically tied, reducing political uncertainty premiums priced into the currency. Investors awaited a new Datafolha poll released late Thursday, which was expected to provide further clarity on the electoral outlook.
Fernando Bergallo, director of advisory at FB Capital, noted that the dollar had traded with a downward bias since the open, supported by falling U.S. yields and gains in local assets. "The dollar came in from the open with a downward bias. Local assets like the real were benefiting from the dollar’s decline abroad, following the drop in the U.S. Treasury yield curve," he said. Bergallo added that the break above R$5.10 triggered significant buying interest, driven by year-end estimates that range from R$5.20 on the optimistic side to R$5.40 among pessimists.
The October dollar futures contract on B3 rose 0.29% to R$5.1400 by 5:22 p.m., reflecting the late-session rebound in the spot rate. Year-to-date, the dollar remains down 7.01% against the real, though the currency has faced intermittent pressure from fiscal and inflation concerns tied to the current administration.
