Price of the Dollar in Brazil today, Tuesday, January 14: The Brazilian Real rises to two-day highs after the US PPI.

The US dollar falls to two-day lows against the Brazilian Real, dragged down by data from the US Producer Price Index (PPI), which has grown less than expected.

He USD/BRL This Tuesday it tested a daily maximum at 6.0973 and then fell sharply to a yestwo-day flight around 6.0500.

The price of the USD/BRL is currently trading at 6.0516, losing 0.78% so far this day.

US producer price inflation rises less than expected in December

  • The United States Producer Price Index (PPI) grew at an annual rate of 3.3% in December after growing 3% in November. The increase has been less than the 3.4% expected by the market. The underlying PPI, for its part, has risen 3.5% compared to the previous 3.4%, placing it three tenths below the 3.8% estimated by the consensus.
  • The monthly PPI has advanced 0.2%, without reaching the previous 0.4% and the 0.3% forecast. Excluding food and energy, the month-on-month indicator has stagnated at 0%, below the 0.2% increase in November and the 0.3% increase expected for today.
  • The US dollar has reacted with a fall against much of its rivals, as this moderation of the PPI could influence the Fed’s decision on the number of interest rate cuts to make this year.

US Dollar FAQs

The United States Dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation alongside local banknotes. According to 2022 data, it is the most traded currency in the world, with more than 88% of all global currency exchange operations, equivalent to an average of $6.6 trillion in daily transactions. After World War II, the USD took over from the pound sterling as the world’s reserve currency.

The single most important factor influencing the value of the US Dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: achieve price stability (control inflation) and promote full employment. Your main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% target set by the Fed, the Fed raises rates, which favors the price of the dollar. When Inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the Dollar.

In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged financial system. This is an unconventional policy measure used when credit has dried up because banks do not lend to each other (for fear of counterparty default). It is a last resort when a simple lowering of interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE usually leads to a weakening of the US Dollar.

Quantitative tightening (QT) is the reverse process by which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest the principal of maturing portfolio securities in new purchases. It is usually positive for the US dollar.

Source: Fx Street

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