BRASILIA, Sept 6 (Reuters) - Brazil’s real rose on Friday to register its first weekly gain against the U.S. dollar in eight, as investors put the extreme caution and gloom of August behind them and added some risk back into their portfolios.
Positive global investor sentiment and solid gains on international financial markets boosted appetite to buy emerging market assets, while the real also benefited from benign domestic inflation figures on Friday.
After falling for seven weeks in a row - its longest losing streak this year - the real rose around 1.8% on the week, hitting a two-week high on Friday of 4.05 per dollar.
“The Brazilian remains our preferred currency in Latin America and is likely to end the week on a stronger note given the broader risk rally,” Morgan Stanley’s emerging market strategists wrote in a note on Friday.
Traders pointed to comments from Federal Reserve Chairman Jerome Powell on Friday, who said that the Fed will continue to act “as appropriate” to sustain the record U.S. economic expansion, a pledge that financial markets have taken to signal a further reduction in interest rates.
Earlier on Friday, data showed that annual inflation in Brazil last month was 3.43%, comfortably below the central bank’s 2019 target of 4.25% and another reminder that inflation is not a threat to the economy right now.
August marked the real’s biggest monthly decline in four years. It fell 8% against the dollar to within sight of its all-time low around 4.25 per dollar.
But in the first week of September market positioning is more balanced, the initial shock from Argentina’s market crash has passed, and there were signs of a thaw in icy U.S.-China trade relations.
Reporting by Jamie McGeever; Editing by Jonathan Oatis