He dollar was quoted last Friday with a drop of 0.47% compared to the previous day, closing at 39,207 pesos, according to the official price of the Central Bank of Uruguay (BCU); But after closing the week with that decline, the US currency is expected to rise again marked by an unstable international context..
The value of dollar It already accumulates a monthly (and annual) variation of 0.47% after increasing more than 0.19 pesos during this month of January. It had closed on (December 29) 2023 at 39,022 pesos.
Meanwhile, on the reference board of the Republic Bank (BROU)he dollar Retail ticket was offered at 38.00 pesos for purchase, and 40.50 pesos for sale. For its part, the preferential value of eBROU dollar It was at 38.50 pesos for purchase, and at 40.00 pesos for sale.
The closing price of the day on the Uruguayan Electronic Stock Exchange (Bevsa) was 39,207 pesos, while the maximum price was 39,250 pesos, and the minimum was 39,150 pesos, values similar to yesterday’s. On this day, the number of transactions was a total of 87, with a transaction amount of 16 million dollars.
How will they affect the projections on the Fed’s rate cuts?
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 last friday 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.
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.
In that sense, 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
