by José de Castro
SAO PAULO (Reuters) – The dollar started 2022 at a strong high, the most intense since October last year, with the real leading on Monday losses in global exchange markets in a day of expressive gains for the US currency in the abroad and adjustment in Brazil after recent moves.
The dollar in cash closed with an increase of 1.63%, at 5.6646 reais on sale. It is the biggest daily percentage increase since October 21 of last year (+1.90%).
Brazil was the relevant country in which the dollar rose the most in this session, a move partly explained by a technical correction after in the last trading session of 2021 (on December 30th) the US currency had tumbled 2.1%. It was the biggest drop since last August and dropped the price below its 50-day moving average, a level recovered on Monday.
The domestic news on Monday brought information about the state of health of President Jair Bolsonaro. The president’s main doctor, Antônio Luiz Macedo, said on Monday, before examining him personally, that “probably” he will not need a new surgery.
News of more categories of civil servants demanding wage increases were also on the radar, amid continued fears about more concessions for government spending hikes. Also on the fiscal front, the president sanctioned a bill at the beginning of the year that renewed the exemption from the payroll of the 17 sectors of the economy.
The movement of the dollar gave indications that the fiscal issue will remain an important driver of the exchange market in 2022, marked by the presidential election in October.
But in this session, the strength of the currency abroad also made prices in Brazil. The dollar jumped 0.55% against a basket of rich countries’ currencies, with widespread gains on the rally in US Treasury bond rates on expectations of higher interest rates there.
Traditionally, higher interest rates in the US hurt emerging currencies by creating risks of capital exodus from these markets.
Société Générale draws attention to three risky external events this week: euro zone inflation data, minutes of the last US central bank meeting and US job creation figures for December.
“The technical scenario and the prospect of initial macro instability are potentially significant,” bank strategists said in a statement.
(By José de Castro; Edited by Maria Pia Palermo)
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