by José de Castro
SAO PAULO (Reuters) – The dollar was practically stable for the second consecutive trading session this Friday and completed the fifth day of very moderate fluctuations by domestic standards, in a classic defensive posture of financial agents before the demonstrations in Brazil promised for the holiday of September 7th, on Tuesday.
On Monday, the foreign exchange market will work, but with low volumes as it is squeezed between the weekend and the holiday. As a result, several traders decided to protect positions this week.
The anticipation of the September 7 events in the streets and their political ramifications has been setting the pace in the markets for a few days (along with the wait, which ended this Friday, for US employment data). This Friday, President Jair Bolsonaro made strong statements on the subject and said that the demonstrations will be an “ultimatum” for those who, according to the president, violate the Constitution.
The STF, on the other hand, has started to adopt a series of measures to counteract any excesses that may occur in the protests, concerned about threats made by Bolsonaro and his allies, said court sources with whom Reuters spoke in recent days.
“There are people doing a parallel with 2013, when there was a crash. Now more people are vaccinated, so they can go out on the streets, and with that the market is more defensive”, said Gustavo Cruz, strategist at RB Investimentos.
He was referring to the wave of protests across the country in June 2013, followed by the sharp drop in popularity of then-President Dilma Rousseff.
Amidst the fierce political climate, the strategist considered it difficult to think of a scenario of optimism and less volatility for Brazil next year. “The opportunity cost of investing in Brazil has already gotten higher and we have to wait for what it will be.”
EMPLOYMENT IN THE USA
On Friday, the dollar in cash had a positive variation of 0.02%, at 5.1839 reais on sale, for the third consecutive trading session, “locked” in the 50-day moving average, in the current context an important technical support.
The price dropped 0.98%, to 5.132 reais, right after the release of much weaker employment data in the US (at 9:30 am in Brasília), which dropped the dollar around the world. But still in the morning, the currency regained strength until it zeroed its losses, eventually rising 0.26%, to 5.1963 reais.
In the week, the dollar fell 0.24%, after varying between +0.20% and -0.32% in the daily closings of the week. Just like this Friday, the day before the currency was practically stable.
In August, the currency accumulates high of 0.22%. In 2021, it yields 0.15%.
Abroad, the US currency index fell 0.1% in the late afternoon, taking some breath after retreating 0.3% after weaker US employment data strengthened expectations that the US central bank did not will rush to cut monetary stimulus.
With that on the radar, the dollar index was hovering at lows in a month.
The US services sector also slowed in August, while recent data from China pointed to moderation in the pace of growth in the world’s second-largest economy – a ravenous consumer of raw materials sold by emerging markets like Brazil.
The rise in Covid-19 cases in the US and other parts of the world is one reason that Société Générale strategists are cautious in the short term towards emerging currencies, whose best moment, they say, is behind them.
An emerging currency index hit an 11-week high on Friday.
In the Brazilian case, “warm” domestic conditions lead professionals to see the dollar rising at the end of each of the next quarters until June 2022, when the currency would hit 5.80 reais – a nominal appreciation of almost 12% before closing this Friday.
Société Générale has maintained a recommendation to buy the dollar against the real since June 15, with an entry point at 5.06 reais, a target at 5.70 reais and a “stop” (level at which the recommendation is canceled) at 4.75 reais. The position has given positive feedback since then.
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