By Luana Maria Benedito
SAO PAULO (Reuters) – The dollar was rising against the real on Wednesday, as President Jair Bolsonaro comments on ICMS overshadowing US inflation data largely within market expectations.
The federal government is studying the preparation of a proposal that prohibits states from charging ICMS on the tariff flag of the electricity bill, Bolsonaro said on Wednesday during a ceremony for signing an interim measure that allows the direct sale of ethanol to gas stations , going back to saying that the population needs to know who is responsible for the rise in prices.
At 12:06, after the news, the dollar advanced 0.40%, to 5.2167 reais on sale, and reached 5.2354 reais at the highest of the trading session. The main dollar futures contract gained 0.63%, at 5.237 reais.
According to Alexandre Netto, head of exchange at Acqua-Vero Investimentos, this behavior partly reflected Bolsonaro’s comments, as well as a foreign flow of purchases of dollars.
Earlier, the currency even dropped, in motion triggered by news that the rise in consumer prices in the United States slowed down in July. In the day’s low, reached just before 10:50 am, the dollar fell 0.61%, to 5.1642 reais on sale.
The US Department of Labor said on Wednesday that the consumer price index rose 0.5% last month, after rising 0.9% in June, meeting economists’ expectations in a Reuters poll.
“The number had no negative effect (on the foreign exchange market), which would have happened if it came in above expectations,” said Lucas Carvalho, an analyst at Toro Investimentos, noting that higher inflation than projections would deepen fears about reduced stimulus in the United States.
Recently, stronger-than-expected employment data have signaled that the labor market may be close to meeting the conditions the Federal Reserve has set to cut its bond purchases. This would not necessarily mean higher interest rates, explained Carlos Duarte, from Planejar – Brazilian Association of Financial Planners, but the reduction in the supply of liquidity would tend to harm riskier currencies, such as the real.
On the other hand, he said, the more aggressive cycle of interest rate tightening by the domestic Central Bank tends to offer support to the Brazilian currency.
A concern in the local environment, said Duarte, is fiscal policy. In the spotlight is the government’s recent effort to change the dynamics of the payment of court orders given the limitations of the spending ceiling, which “smells like fiscal pedaling” to foreign investors, he explained.
The day before, the US spot currency fell 0.96%, to 5.1957 reais on sale, the most intense devaluation since July 28 (-1.26%).
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