By Luana Maria Benedito
SAO PAULO (Reuters) – The dollar lost momentum after surpassing 5.21 reais earlier on Thursday, with the high level attracting sellers, although the currency showed volatility as investors followed speeches from the Federal Reserve chair, Jerome Powell, and the president of the Central Bank of Brazil.
Also under the spotlight were global fears of recession and domestic fiscal uncertainty, which could keep instability high throughout the trading session.
At 12:11 (Brasília time), the spot dollar retreated 0.03%, at 5.1775 reais on sale, alternating light highs and lows.
Earlier, the currency gained 0.69% at 5.2148 reais, which would be equivalent to its highest level to close since February 14 of this year (5.2195 reais), but analysts said those levels called sellers to the market, which took advantage of the high value of the dollar.
On B3, at 12:11 (GMT), the dollar futures contract with the first maturity fell 0.38% to 5.1890 reais.
Powell, who was giving his second testimony to the US Congress this morning, was in the focus of markets, which were still digesting his comments on Thursday. The day before, the Fed chair signaled a commitment to fighting inflation and acknowledged that the world’s largest economy faces risks.
Fears that the world is heading for a contraction in activity have gained traction since the U.S. central bank raised its policy rate at the strongest pace since 1994 last week, by 75 percentage points, as borrowing costs higher prices tend to constrain consumer spending.
The president of the Central Bank of Brazil said this Thursday that the normalization of monetary policy abroad could lead to a stronger dollar. Roberto Campos Neto made these comments after the municipality raised its forecast for Brazilian Gross Domestic Product (GDP) growth in 2022 to 1.7%, compared to an estimate of 1.0% presented three months ago. Despite the improvement, the institution cited uncertainties about forecasts.
As they followed the speeches of monetary policy authorities, investors also carefully monitored the domestic political-fiscal news.
The government’s initiatives to create aid for truck drivers and expand gas vouchers to low-income families this election year, for example, raised fears about what the impact will be on public coffers, at a time of tightening Union accounts. Dan Kawa, chief investment officer at TAG, said such discussions “may continue to put pressure on the dollar and the long yield curve, given the prospect of a worsening fiscal.”
The day before, the North American currency in sight rose 0.50%, at 5.1791 reais on sale.
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