How long will the exchange rate remain high?

CAUSE: In recent days, the dollar has seen a significant rise, reaching historic levels near R$6.00. This is attributed to two main factors: the announcement of the fiscal package in Brazil and the uncertainties generated by Donald Trump's return to international politics. In Brazil's case, the market reacted negatively to the package presented by the government, which included spending cuts considered insufficient and ambiguous fiscal measures, such as expanding income tax exemptions, in addition to additional taxes on high incomes – the market did not like it. Furthermore, in the global scenario, Trump's statements regarding protectionist policies and the strengthening of the dollar have increased exchange rate volatility, intensifying the appreciation of the US currency.

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CONSEQUENCE: The consequences of this appreciation are immediate and impact several sectors of the Brazilian economy. The rise in the dollar makes imported products, such as fuel and electronics, more expensive, putting pressure on inflation – which is already under pressure. Companies with dollar-denominated debt face higher costs, while exporters may benefit in the short term - but how long can this be sustained without prices rising absurdly? However, the environment of exchange rate instability affects investor confidence and could slow down the economy, especially if combined with a domestic fiscal policy that does not convey credibility to the market.

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