By Luana Maria Benedito
SAO PAULO (Reuters) – The dollar recovered after earlier trading below the 5.00 reais level for the first time in nearly eight months, but still closed at the lowest level since August this Thursday, after a new deceleration in the pace of monetary tightening in the United States and the signaling of higher interest rates for longer in Brazil painted a picture of rate differential favorable to the domestic currency.
The spot US currency closed down 0.35%, at 5.0457 reais on sale, the lowest closing level since August 29, 2022 (5.0330).
Earlier, the dollar fell by 2.42%, to 4.9408 reais, but recovered throughout the afternoon, which Jefferson Rugik, chief executive of Correparti Corretora, attributed to the advance of the North American currency abroad and the a movement on the part of importers, who took advantage of the “cheapness” of the currency to go shopping.
This afternoon, the dollar index against a basket of strong pairs rose more than 0.6%, in what market agents called an adjustment after the indicator fell to its lowest level in nine months on the eve.
The dollar’s recent slump both abroad and at home was triggered in part by the Federal Reserve’s decision the day before to raise its target rate by 0.25 percentage point, a slowdown from previous increases of 0.50 and up to 0.75 point.
“In the United States there is optimism in relation to the country’s inflationary scenario, while the Federal Reserve has been gradually reducing the pace of its interest rate hike… StoneX.
At the same time, highlighted Mattos, the Central Bank of Brazil decided on Wednesday to keep the Selic at 13.75% per year and indicated that rates will remain high for longer, noting that fiscal uncertainty and the deterioration in inflation expectations of the market raise the cost of achieving the goals.
“With interest rates high for longer, you end up anchoring the Brazilian currency more. The interest differential is not the only variable that affects the currency’s performance, but it is one of them, and therefore contributes to a stable or falling dollar”, evaluated Roberto Padovani, chief economist at Banco BV.
The greater the difference between the cost of domestic and international loans, the more attractive the real becomes for use in “carry trade” strategies, which consist of contracting a loan in a low-interest country and investing these resources in the most profitable market.
In addition to the interest factor, some investors pointed to the result of the elections for the leadership of Congress as an additional support for the real, after the government of President Luiz Inácio Lula da Silva got what it wanted by seeing re-elected Arthur Lira (PP-AL ) as President of the Chamber and Rodrigo Pacheco (PSD-MG) as President of the Senate, even though the Bolsonarist opposition has shown relative political strength among the senators.
“Chamber and Senate consolidated better governance conditions, this is super positive for the activity issue,” said Bruno Mori, financial planner for Planejar, who also cited an economic reopening in China as another boost for the domestic currency and other currencies. emerging countries.
With the real swimming with the current, the tendency for the month of February is that the dollar will definitely break the barrier of 5.00 reais down, added the specialist.
So far in 2023, the US currency drops 4.40% against the Brazilian currency. In the accumulated of 2022, the dollar retreated 5.30% against the real.
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