06/19/2024 – 17:40
After sustaining a firm rise during the day, approaching R$ 5.50, the spot dollar slowed down in the final stretch of business and ended close to stability, with investors adjusting positions before the Copom’s decision on interest rates, on Wednesday night – fair, in a movement amplified by reduced liquidity in Brazil due to a holiday in the United States.
The dollar in cash ended the day at R$5.4407 on sale, a slight increase of 0.13%. This is the highest closing price since January 4, 2023 — the beginning of the Lula government — when it closed at R$5.4513. In four days, the US currency accumulated an increase of 1.35%. For the month, the accumulated gain is 3.61%.
At 5:06 pm, on B3, the first maturity dollar futures contract fell 0.07%, to R$5.4440 on sale.
With the North American market closed due to the Juneteenth holiday, dollar prices were influenced this Wednesday by expectations before the decision by the Central Bank’s Monetary Policy Committee (Copom) on the Selic, currently at 10.50% per year.
Investors’ search for protection of the dollar made the price on the spot market reach a maximum of 5.4840 (+0.92%) at 2:30 pm. Close to closing, however, prices lost strength and the dollar returned to stability.
In the market there is almost a consensus, priced in the forward curve, that the Central Bank will maintain the Selic base rate at 10.50% per year, putting an end to the current cycle of cuts.
The main doubt is whether the vote will be divided, as in the May meeting, or whether there will be unanimity among the nine BC directors. Professionals interviewed by Reuters stated that if the four directors appointed by President Luiz Inácio Lula da Silva vote again as a block, to cut the Selic, this will tend to stress assets again, even if the Selic remains at 10.50% per year.
After Lula harshly criticized the president of the BC, Roberto Campos Neto, the day before, attention will be focused mainly on the vote of the director of Monetary Policy, Gabriel Galípolo, tipped to take command of the authority from 2025.
“Although the market believes that there will not be a scare like in May, it is protecting itself”, commented during the afternoon the manager of the Financial Derivatives desk at Commcor DTVM, Cleber Alessie Machado, when justifying the rise in prices. “If there is a division or if there is a ‘dovish surprise’ in the Copom, the dollar will rise,” he added.
An operator interviewed by Reuters summarized the market’s most general perception this Wednesday: the dollar will only fall the day after the Copom if the Selic remains at 10.50% per year, by unanimous decision of BC directors. Any decision other than this has the potential to further stress prices.
The same professional considered that, despite the dollar having risen towards R$5.50 in recent days, there would still be plenty of room for new assessments if the Copom result is not well evaluated by investors. This is because concerns about the Brazilian political scenario and fiscal balance remain on the operating tables.
At 5:15 pm, abroad, the dollar index — which measures the performance of the US currency against a basket of six currencies — fell 0.04%, to 105.230.
In Brazil, in the morning, the BC sold all 12,000 traditional currency swap contracts offered to roll over August maturities.
In the afternoon, the BC reported that Brazil registered a total positive foreign exchange flow of R$6.337 billion in June until the 14th, with net inflows of 2.104 billion dollars through the financial channel and inflows of R$4.233 billion through the commercial channel.
Ibovespa
The Ibovespa closed higher this Wednesday, but with much reduced volume, reflecting caution before the decision by the Central Bank’s Monetary Policy Committee (Copom) and the absence of Wall Street due to a holiday in the United States.
The reference index for the Brazilian stock market, Ibovespa rose 0.53%, to 120,261.34 points, close to the day’s high of 120,383.33 points. At its lowest point, it reached 118,960.37 points.
Financial volume totaled just 14.15 billion reais, well below the year’s daily average of 23.9 billion reais.
The outcome of the Copom, especially the decision’s voting score, occupies the attention of financial agents who are suspicious about the future conduct of monetary policy, following changes in the BC board and the departure of its president by the end of the year.
The day before, the President of the Republic once again criticized the performance of the head of the BC, Roberto Campos Neto, which in the view of some agents in the market corroborates a scenario of yet another divided decision by the Copom on the Selic.
Among economists, the prevailing bet is that the basic interest rate will be maintained at 10.50% per year, with a minority still estimating a cut of 0.25 percentage points.
In the previous meeting, the BC reduced the pace of monetary easing by making a cut of 0.25 points, with a split score, with divergence from directors appointed by President Luiz Inácio Lula da Silva, who voted for a reduction of 0.50 points.
In the view of the head of EQI Research, Luís Moran, it was a day of not taking relevant positions with the US market closed and Copom at the end of the day, especially with the political component added by President Lula the day before the decision.
He added that, until Lula’s speech, there was more or less a consensus that, after the discomfort caused by the result of the previous meeting, the decision at this meeting would be unanimous, most likely to pause the cycle of cuts.
“Technically, there is no way to reduce (the Selic) right now,” he stated, citing that projections for inflation are unmoored.
HIGHLIGHTS
– BRF ON advanced 4.33%, maintaining the positive tone of the previous day, when it closed with an increase of 5.5%, against the backdrop of the possibility of China restricting the import of pork into the European Union. MARFRIG ON, BRF’s main shareholder, ended with an increase of 3.03%. Still in the sector, JBS ON closed up 1.76% and MINERVA ON increased in value by 2.86%.
– WEG ON closed with a gain of 2.44%, completing six trading sessions without a negative sign, with the company’s recent news including a partnership with Horse in the powertrain of light and heavy commercial vehicles and an agreement to equip the Orizon power generation plant for from the trash.
– VALE ON rose 0.31%, despite the weakness of iron ore futures in China, where the most traded contract on the Dalian Commodity Exchange ended the day’s trading with a fall of 0.36%, at 824 yuan (113 .55 dollars) per ton, after reaching 835.5 yuan per ton at the beginning of the session.
– ITAÚ UNIBANCO PN advanced 0.78%, in an online event session with bank executives, in which the CEO said that “everything leads us to believe” that Itaú will again pay extraordinary dividends to shareholders. BRADESCO PN gained 0.48%.
– PETROBRAS PN closed with an increase of 0.08%, after a strong appreciation the day before, with Wednesday marked by a timid variation in Brent oil abroad and the inauguration ceremony of the new executive president of the state-owned company, Magda Chambriard. In her speech, she stated that she received the order from Lula to “move Petrobras, because it boosts Brazil’s GDP”, and said that she will do what is in the company’s investment plan.
– AZUL PN fell 4.62%, in the sixth consecutive session of decline, renewing lows since March 2023. Last week, Goldman Sachs slightly reduced its forecasts for the company’s net revenue and Ebitda in the period from 2024 to 2026, cutting the target price of shares from 23.50 to 20.10 reais. This Wednesday, the shares closed at 8.06 reais.
– CSN ON fell 1.85%, with adjustments, after rising the day before, when the Superior Court of Justice (STJ) decided to accept the company’s appeal involving compensation of around 5 billion reais to be paid by Ternium regarding the entry of this last one at Usiminas. Ternium promised to appeal.
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