SAO PAULO (Reuters) – The foreign exchange and interest markets in Brazil were once again registering a day of strong volatility, with the dollar holding above 5.60 reais and DI rates falling after both showed an earlier rally, while traders tried to find a balance in the hazy landscape.
The dollar in cash jumped 1.01%, to 5.6829 reais, but then retreated and even dropped 0.16%, to 5.6168 reais. Around 10:58 am, the price was up 0.33%, at 5.6443 reais on sale.
In interest rates, the January 2023 DI rate – which shot up 47 basis points, approaching 12.9% – dropped 23.5 basis points, to 12.165%.
Strong fiscal data helped to improve the market price reaction, which also analyzed Confaz’ decision to freeze the value of ICMS charged on fuel sales for 90 days.
“The pre market is totally dysfunctional. The market doesn’t count anymore, and only has new waves of ‘stops’. It is past time for the Treasury to enter the market, removing pre-market risk and paying with LFT”, commented Roberto Motta, in charge of the derivatives desk at Genial Investimentos, on Twitter.
The fixed income market has suffered most from the recent turmoil, as mark-to-market has imposed severe losses on portfolios due to the prospect of a loose fiscal policy that will demand even higher interest rates in a scenario of good inflation. above the target.
The day before, an Anbima index that tracks the prices of fixed-rate government bonds plummeted by 1%, a very significant drop for the sector, the largest since the peak of the pandemic in 2020 and which led the index to its lowest value since March of last year.
The pressure on fixed income is increased by the dollar rally, which in the year has already reached 8.6%. Evidence of the high level of risk, the real has been devaluing along with the currency of Turkey, a country that has promoted interest rate cuts due to political interference, while in Brazil the BC made this week the biggest monetary tightening in almost two decades.
If domestic issues were not enough, the exchange rate is suffering from external pressure, with the dollar index rising again significantly in this session after economic indicators in the US endorse the narrative that the increase in inflation may lead not only to an imminent reduction in stimuli , but also the anticipated rise in interest rates.
“Investors continue to follow the disclosure of corporate balance sheets, but with attention turning to the FOMC meeting, which will take place next week, when the Fed may announce the beginning of the reduction of the asset purchase program,” Bradesco said in a statement morning. The Fomc is the US central bank’s monetary policy committee, responsible for interest rate decisions there.
With the dollar strong globally, emerging currencies retreated 0.3%, to very close to lows in a year.
(By José de Castro; edition by Luana Maria Benedito)
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