by José de Castro
SAO PAULO (Reuters) – The dollar once again registered a firm high against the real, closing this Monday at the highest level in more than a month, but after hitting 4.95 reais the currency lost strength and closed below 4.90 real, borrowing some respite from North American markets.
The spot dollar rose 1.46%, to 4.8768 reais on sale. It is the highest value since last March 22 (4.9153 reais).
At the maximum of the trading session, the currency was 4.95 reais, a jump of 2.99%.
The market even started the day selling dollars – at the minimum, played in the first hour of business, the price dropped 0.17%, to 4.7985 reais. But from mid-morning onwards, the US currency began to gain traction abroad at the same time as markets in Europe deteriorated and raw materials fell on fears related to the Chinese economy and a more aggressive US central bank. in monetary policy.
In the afternoon, the rally on Wall Street – where the three main indexes closed higher after drops of up to 1.66% – calmed the nervousness of dollar buyers, and the currency moved away from highs without the need for further intervention by the Central Bank. in the foreign exchange market.
In any case, the pressure on quotations drew attention. At the day’s low, at 4.95 per dollar, the real has accumulated a loss of 6.69% since the close of last Wednesday and 7.43% compared to the intraday low of April 5 (4,582 reais).
In two trading sessions, the real was the worst performer among its main emerging peers. The dollar’s high accumulated in the period is 5.59%, the strongest on the same basis of comparison since May 18, 2017 (+9.48%). On that date alone, the dollar soared 8.15%, reacting to the bombshell in the political world after Joesley Batista, one of the partners at JBS, involved the then President of the Republic Michel Temer.
And political noises have returned to weigh on the market in recent days. Investors had to deal with new headlines about chances of increased spending on Auxílio Brasil, in a context in which investors are already questioning the economic policies to be adopted by the government that takes office in 2023.
Parallel to this, the crisis between the Powers returned to the spotlight after President Jair Bolsonaro announced last Thursday a decree granting a pardon to deputy Daniel Silveira, convicted by the Federal Supreme Court of crimes of coercion in the course of the process and attack on the Democratic state.
“More worrying, however, was the tension created between Minister Barroso of the STF and the Armed Forces over the fairness of electronic voting machines. This issue creates a climate of strong instability for the October election, and this issue is central to many international investors who see democratic stability as a fundamental point for long-term investments”, said André Perfeito, chief economist at Necton Investimentos.
For the economist, it is difficult to determine whether in fact recent political issues are “pricing” the market, but ignoring these issues no longer seems an option. “It is clear that the market is already eyeing the election, and the exchanges between a minister of the Supreme Court and the Armed Forces is not an auspicious sign”, he concluded.
But the fundamentals of the real, supported by an improvement in the terms of trade, a still high interest rate differential in favor of Brazil and a positive real interest rate, still endorse the benign view of Gustavo Menezes, macro manager at AZ Quest, in relation to the exchange rate. . For him, the external scenario has prevailed in the dynamics of the formation of the dollar price.
“This volatility, of course, brings some warnings, but we always oscillate within a long position in reais”, he said. “These noises (political-institutional and electoral) end up influencing, but the concern would be of rupture, and so close to the elections they shouldn’t worry”, he added.
(Edited by Bernardo Caram)
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