R$ 5.20. That is how much one US dollar was worth in Brazil this Friday (28), after Federal Reserve chair Kevin Warsh signaled at the Jackson Hole symposium that US interest rates may rise again, according to InfoMoney. For ordinary Brazilians the message is direct: at R$ 5.20, every US$ 100 spent on international purchases or travel costs R$ 520, and a stronger dollar usually filters through to fuel and supermarket prices later, since oil and many goods are priced in dollars.

Speaking at Jackson Hole, the annual gathering of central bankers in Wyoming, Warsh said the US economy keeps growing but signs that inflation is converging to the 2% target remain weak, InfoMoney reported. "It is our responsibility to ensure price stability", he said. According to CNN Brasil, he added that without certainty that inflation is moving toward the target fast enough, the Fed has "more work to do".

Markets read the speech as a rate hike warning. Bets on an increase in the US rate at the September 18 meeting jumped from 35.4% to 59.7%, according to CME Group's FedWatch tool cited by InfoMoney. US rates currently sit between 3.5% and 3.75% a year, and investors now see a rise to between 3.75% and 4% as likely.

Understand

Higher interest rates in the United States act like a magnet for global money. When the US rate rises, investors tend to pull funds out of countries like Brazil to buy US Treasury bonds, seen as the safest investment in the world. With fewer dollars circulating in the Brazilian market, the currency gets more expensive in reais.

Brazil's stock market felt it too. The Ibovespa, the main index of the B3 exchange in São Paulo, was down 0.60% around 12:45 p.m. at 174,084 points, ending a run of seven straight gains. "He gave every hint, even if he did not spell it out, that he will raise rates", economist Marcelo Fonseca of CVPAR told InfoMoney.

August has been a back and forth month for Brazilian investors. At one point the Ibovespa was down almost 7% for the month; a later recovery cut the losses to about 1%, according to Eduardo Carlier, co-head of investments at Azimut Brasil. He said the firm remains conservative, with more money in fixed income, waiting for clarity on the election and on US rates.