When interest rates in Brazil rise relative to those in the United States, it typically attracts foreign investment into Brazil, as investors seek higher returns. This increased demand for Brazilian assets generally leads to an appreciation of the Brazilian real against the U.S. dollar, as investors need to convert their dollars into reals to invest in Brazil.
At the same time, the higher interest rates in Brazil may make the U.S. dollar less attractive as an investment, potentially leading to a depreciation of the dollar against the real.
Therefore, the correct response is:
The U.S. dollar is depreciating while the Brazilian real is appreciating.
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