R$ 5.196. That is what one US dollar cost at the close of trading in Brazil this Friday (28), up 0.62% on the day. For anyone planning a trip abroad or shopping on an international website, US$ 100 now costs R$ 519.60, roughly R$ 3.20 more than the day before.

The trigger came from abroad. Federal Reserve Chair Kevin Warsh said in a speech that the US central bank "has work to do" if inflation does not return clearly to its 2% annual target, according to CNN Brasil. Markets read the remarks as a warning that US interest rates could rise as early as September.

Warsh spoke at the Jackson Hole symposium, the annual gathering of central bankers in the United States. Inflation as measured by the PCE index, the Fed's preferred gauge of consumer prices, stood at 3.7% in the 12 months through July, nearly double the target, CNN Brasil reported.

Why it matters

Higher US interest rates act like a magnet for global money. When US Treasury bonds pay more, investors pull funds out of countries like Brazil to invest there, which reduces the supply of dollars in Brazil and pushes the currency's price up.

Before the speech, investors saw roughly a one-in-three chance of a rate hike in September, according to CME Group data. Afterward, the yield on the two-year US Treasury note, the most sensitive to rate expectations, climbed to 4.35%, Agência Brasil reported. US benchmark rates have been held at 3.50% to 3.75% since December, and the Fed's next decision is due on September 15 and 16.

During the session, the dollar dipped as low as R$ 5.1581 at the open, then gained strength and hit R$ 5.23 around 1:18 p.m., the day's high, before easing back to R$ 5.196 at the close. The currency gained 1.06% over the week, though it remains down 5.34% for the year, meaning the real is still stronger than it was in January.

Brazilian data also moved markets. The country created 58,568 formal jobs in July, the worst result for the month since 2020, according to Caged, the official payroll registry. The weak figure reinforced bets that the Central Bank of Brazil will cut the Selic, the country's benchmark rate now at 14% a year, by 0.25 percentage point to 13.75% at its September meeting.

The stock market shrugged off the gloom abroad. The Ibovespa, the main index of the B3 exchange in São Paulo, rose 0.30% to 175,664 points, an eighth straight gain, and ended the week up 2.71%. In New York it was the opposite: the Dow Jones, S&P 500 and Nasdaq all fell, with the tech-heavy index down 0.52%, according to Agência Brasil.