The behavior of dollar remains relatively stable globally, with a certain upward trend, but operators’ expectations regarding the beginning of the cycle of interest rate cuts by the Federal Reserve (Fed) They go through ups and downs that can impact the price globally. Meanwhile in Uruguay These movements could have a decisive influence on the exchange rate local.
The macroeconomic data in USA seem to change the panorama of dollar in the short and medium term with each new information. Thus, on Thursday it seemed that operators would moderate in terms of the speed and number of basis points of cuts expected in the direction of the monetary politics of the Fed for this year after inflation slowed less than expected in December; but yesterday Producer Price Index marked a new rise in betting.
In this way, the dollar index slowed its gains at the end of the week, held back by the revival of the idea that there will be a quick reduction in prices reference interest rates given the drop in the cost of goods, supported by the maintenance of the prices of services – which increase the possibility of a lower inflation in the coming months.
In that sense, operators increased their bets once again, and federal funds futures imply a 79% probability of a rate cut in March, up from 73% on Thursday, according to the tool FedWatch of the CME Group.
“Although, in general, it would not be said that the macroeconomic outlook is screaming that they need to cut so quickly, the market seems to be excited about the prospect of reductions,” he told Reuters. Steve Englander, of Standard Chartered Bank in NY.
Traders maintained their view that rate cuts in March are likely, even after U.S. inflation data consumer prices Thursday will exceed expectations. He employment report Last week’s December also showed strong nonfarm payrolls growth, although the underlying details were mixed.
Meanwhile, the international geopolitical context It can also affect the price, with the increase in tensions in middle East and a growth in the tendency of investors towards safer alternatives to protect value, such as the dollar. In fact, the positive result and the slight rise in dollar index Friday was due to security purchases after American and British warplanes, ships and submarines launched dozens of airstrikes in Yemen overnight.
What can happen in Uruguay?
At the local level, meanwhile, the dollar It closed with a drop of 0.47%, and it was the second decline in the week, in the month and in the year; although it was the largest loss of value recorded so far in the incipient 2024.
With this behavior, the US currency closed at 39,207 pesos, according to official data from the Central Bank of Uruguay (BCU)and maintains a positive accumulated of 0.47%.
Certainly, the international context influences the behavior of the currency in the local exchange market —although it fell at the end of the week, in the opposite direction to what happened with the dollar index.
Therefore, in addition to local factors that impact the exchange rate directly—such as interest rates and foreign exchange income through exports and investments—the BCU and the Ministry of Economy and Finance (MEF) They must observe what happens in the world.
This is because, on the one hand, the behavior of operators in their expectations of the rate cut can lead to a dollar depreciation —that has its correlation at the local level, in line with the analyzes on a weak performance of the US currency for 2024—; but, on the other hand, geopolitical tensions can lead to the dollar be revalued as haven of valueand that the increase in demand leads to a increase in its price.
Source: Ambito
