By Luana Maria Benedito
SAO PAULO (Reuters) – The dollar reversed intense gains recorded during the trading session, which took it above 5.75 reais, and closed down against the Brazilian currency on Friday, with guarantees from Economy Minister Paulo Guedes, from who will not leave office easing fears of total lack of control over the situation of public accounts.
Still, the dollar recorded its biggest weekly appreciation since July.
The dollar in cash retreated 0.77%, to 5.6244 reais on sale, after reaching 5.7551 reais at the peak of the day, up 1.53%. According to market participants, the highs of the day were reached amid rumors about Guedes’ possible departure from his position, as he was dissatisfied with the government’s plans to disregard the spending ceiling to finance Auxílio Brasil.
But Guedes denied this Friday afternoon, in a press conference, that he had resigned, which helped the dollar to close more than 13 cents below intraday highs.
“It appears that it would be marginally preferable for (Guedes) to stay in the job, even if the market thinks his credibility has diminished considerably,” Citi strategists said in a statement.
In his comments this Friday, Guedes said that there was no change in the fundamentals of the Brazilian economy with the formula found to finance the new Bolsa Família, although he admitted that he prefers to get a lower score in the fiscal aspect in exchange for serving the most fragile .
Despite the dollar’s devaluation in this session, investors drew attention to the impressive volatility and amplitude observed during the session, which would reflect the perception that the government will even break the spending ceiling to finance a more robust Auxílio Brasil.
The hole in what is now considered the main anchor of the country’s public accounts to finance social benefits could pave the way for more spending outside the current fiscal rules, experts fear, especially with the interpretation that this is a populist turn of the government with the approach of the 2022 elections.
Amid the worrying fiscal news of recent days, the US currency ended the week with a rise of 3.115%, the most pronounced since the week ending July 9 this year (+4.01%).
As on Thursday, the Central Bank did not announce net dollar offers in this session.
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