By Luana Maria Benedito
SAO PAULO (Reuters) – The dollar advanced against the real on Friday and marked a fourth consecutive week of gains, with domestic fiscal noise preventing the local currency market from taking advantage of a recovery in risky assets abroad.
The US currency closed up 0.43% at 5.2518 reais, the highest level since February 8 this year (5.2604), after changing signals several times throughout the session, going from 5, 2033 reais at the minimum (-0.49%) to 5.2770 reais at the maximum of the day (+0.92%).
In relation to last Friday’s close, the dollar advanced 2.06%, marking the fourth consecutive week of appreciation, the longest sequence of the type since the five consecutive weekly advances completed on October 8 of last year, accumulating a jump of 10, 83% in the period.
On B3, at 17:13 (GMT), the first-maturity dollar futures contract rose 0.28% to 5.2670 reais.
Investors showed strong concern in this trading session with the discussion of government measures to offset the rise in fuel prices, which, as they risk leading to an increase in spending outside the cap rule, could worsen Brazil’s fiscal credibility.
Senator Fernando Bezerra Coelho (MDB-PE), rapporteur for the so-called PEC on Fuels, stated that the expansion of Aid Brasil from 400 to 600 reais is being negotiated to be included in his report on the Proposed Amendment to the Constitution, which must be presented next Monday.
Also under discussion in Congress are measures to increase the value of the gas voucher to families and the creation of an aid of 1 thousand reais per month for the supply of diesel from autonomous transporters, which aims to serve 900 thousand truck drivers by the end of the year.
“They are trying to put as much ‘goodness’ into this PEC as possible, measures to try to increase the government’s popularity in the coming months before the elections,” said Gustavo Cruz, strategist at RB Investimentos.
“Once the benefits are granted, it is difficult to withdraw them later”, which erodes Brazil’s fiscal credibility and has a direct impact on the local currency. “The exchange rate is a thermometer of confidence in the country,” said Cruz.
Investors also reacted this Friday to the news that the IPCA-15 accelerated the rise to 0.69% in June, a reading above the expectation pointed out in a Reuters poll of an advance of 0.62%.
Rates on major DI contracts rose sharply on the day in the wake of data, which boosted the implied probability of a 0.50 percentage point tightening of the Selic rate by the Central Bank at its next monetary policy meeting in August to 75%. Just a few days ago, the market was evenly split between a 0.50 point high and a more moderate 0.25 point adjustment.
On the one hand, the prospect of higher interest rates may favor the real, as it implies greater profitability of the local currency. On the other hand, if high inflation forces the BC to keep the Selic at restrictive levels for a long time, economic activity – which is also important in the pricing of the exchange rate – will be harmed, Cruz assessed.
Overseas, prospects remained gloomy, despite the broad appreciation of several assets considered risky this Friday, a move that Étore Sanchez, chief economist at Ativa Investimentos, characterized as “more of an adjustment movement than an optimism regarding the scenario”. global”.
Global equities soared and the dollar fell against both strong currencies and emerging market currencies on Friday. However, the risk of a more aggressive stance by central banks pushing the world into a recession remained on investors’ radar, especially after the Federal Reserve raised interest rates by 0.75 percentage point last week, the fastest pace since 1994.
The dollar closed just half a cent of a real below its 200-day linear moving average, an important level that, if exceeded, could trigger more dollar purchases. This technical level has not been surpassed since January of this year.
In the accumulated of 2022, the losses of the North American currency were reduced to 5.77%, with the dollar 14% above the lowest closing price this year, of 4.6075 reais, reached in early April.
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