By Luana Maria Benedito
SAO PAULO (Reuters) – The dollar soared against the real on Thursday and closed at a new high in six months, after surpassing 5.69 reais at the intraday peak, reflecting widespread panic in Brazilian markets with possible fiscal loss after the government confirms plans to circumvent the spending ceiling to fund measures seen as populist.
The dollar in cash closed up 1.90%, at 5.6683 reais on sale, the highest level for closing since April 14 this year (5.6699 reais) and its highest daily appreciation since September 8 (+2. 84%).
The US currency has already started the day in a rush after, on Wednesday, after the closing of the spot market, Economy Minister Paulo Guedes said that the government was considering paying the temporary benefit that will boost the new Bolsa Família outside the spending ceiling or opt for a change in the constitutional rule on the fiscal limit to accommodate it.
This Thursday afternoon, the rapporteur of the PEC dos Precatórios, Deputy Hugo Motta, (Republicans-PB), presented a new opinion in which he proposed a modification of the deadline considered in the correction of the spending ceiling by the Broad Consumer Price Index (IPCA), a measure that, according to him, opens an additional 39 billion reais for expenses in 2022.
For Carla Argenta, chief economist at CM Capital, the government’s signal justifies the markets’ reaction: “Any hole in the ceiling would represent a break from what is currently our only fiscal anchor; if there is this crack, we will have an unimaginable scenario.”
According to her, the market fears that aid spending is just the beginning of another series of populist government measures as the 2022 elections approach.
“Today Bolsonaro has already talked about aid for truck drivers, there is great pressure for intervention in fuel prices… It is a series of populist measures coming from a government that sold itself as a great defender of public accounts.”
Amid the resurgence of strike threats by truck drivers due to rising fuel prices, President Jair Bolsonaro announced on Thursday that the government will offer some 750,000 self-employed truck drivers help to offset the rise in diesel prices.
The dollar saw the session’s highs in the wake of his comments, reaching 5.6911 reais on sale at the intraday peak, up 2.3%.
Even amid the soaring of the US currency, the Central Bank did not announce net sales of dollars this Thursday, after having been active in the foreign exchange market in the last six sessions. An economist at a large investment brokerage said he interpreted the autarchy’s “silence” as an attempt to convey a message to Brasília about the urgency of upholding fiscal responsibility.
But Argenta, from CM Capital, disagrees. “The Central Bank knows that it cannot change the direction of the dollar, only to soften some sudden movements”, she said, noting that the autarchy does not intend to control the levels of the US currency. “The BC thought that it was not necessary to provide liquidity to the market.”
The blow to domestic markets on Thursday was widespread. The Ibovespa collapsed nearly 3% this Thursday, while future interest rates soared.
(Edition by Isabel Versiani)
The dollar post shoots up to a new 6-month high against the real with a panic of fiscal unrest first appeared in ISTOÉ MONEY.
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