The factors driving the dollar near its high of the year

He dollar It once again exceeded 42 pesos and reached a maximum of a month and a half this Friday, in a local exchange market that was strongly influenced by the effect Donald Trump, but also due to the weakness of the US currency in Latin America.

At a time when investors analyze the signals coming from USA with the policies that Trump would implement in his second government and would affect Uruguay and to the rest of the world, another factor to take into account is the devaluation in Brazil, because the real It is a regional reference currency for the weight.

When analyzing the variables behind the jump of almost 1% per day that the dollar, Closing a week with an improvement of 1.32% and remaining close to its maximum in more than 31 months, analysts agree that one of the fundamental factors is the direction that the president-elect of the United States would give to the management.

The Trump effect

Diego Rodriguez, managing partner of Gastón Bengochea & Cía. Stock Broker, considered in statements to Scope that “there is no domestic reason to explain the rise” and attributed it to “an appreciation of the regional and global dollar against the main currencies,” as well as the decline in the commodities and the gold.

In this regard, the financial advisor of Balanz, Alan Babic, He assured in dialogue with this medium that a good part of the increase due to the Republican’s victory “leads to an expectation that the inflationary outlook remains high in the United States due to the policies it wants to promote, such as imposing duty to imports.”

“This makes products worth more, generates inflation and causes rates, especially long ones, to remain high for an indefinite period of time, regardless of whether the Federal Reserve (Fed) The rate dropped a quarter of a point yesterday,” he observed.

Along the same lines, the supervisor of the Economic Analysis and Forecasting Service of CPA Ferrere, Giuliano Cantisani, He told Ámbito that “the scenario of Trump’s victory has generated this effect of strengthening the dollar in the face of expectations of less rate cuts and less currency flow towards the region.”

Brazil and the regional factor

In parallel, Babic referred to the depreciation of the real and recalled that “a Uruguay “Everything that happens in Brazil affects it,” at a time when the dollar exceeded 5.7 reais and has accumulated a drop of nearly 18% so far this year.

In turn, he alluded to the combination of factors. “In recent weeks the dollar has been rising because Uruguay I was very expectant about what would happen to him. social security plebiscite and the rebound came all together,” he commented on the effects generated by the expectation about the initiative of the PIT-CNT, added to what happened in the neighboring country and in the United States.

The short-term outlook

Looking to the future, Rodríguez highlighted that “the policies announced by Trump may once again raise concerns about the inflation future in the United States and that can add volatility in the dollar”, while with respect to the runoff 2024 and the local level noted: “I do not expect volatility due to electoral uncertainty and, if there is, part of the adjustment is being made by the market due to external variables.”

Meanwhile, Cantisani focused on US interest rates. “Although yesterday a new rate cut by the Fed took place, in line with what was expected, there was also a tone of greater caution on the part of the monetary authority,” he warned and maintained that “in fact, the market “anticipates fewer cuts than a few weeks ago,” which conspires against a falling greenback.

In turn, Babic proposed a “wait and see” scenario. “In the previous administration, Trump was desperate to lower rates so that the dollar would weaken and the United States would be more competitive at a global level,” he stated and stated: “Let’s wait and see what happens throughout the mandate: whether or not he is going to demand that the Fed lower rates and how he is going to behave with China, country with which there was a trade war at the time.”