If the scenario of falls around the dollar continues at the same pace, the US currency may close the day below R$5 as early as this Wednesday (23). The day’s trading opened on a retreat, with the domestic market proving to be quite attractive to investors with an eye on higher interest rates and rising commodity prices – at 11 am the share price reached R$4.99.
Since the turn of the year, the exchange rate has dropped 9.36% against the real, from R$5.66 to R$5.01 this Tuesday (22). The value is the lowest since June 30, when it closed the day at R$ 4.97.
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Commodities, responsible for the expansion of the Brazilian economy during most of the Lula and Dilma administrations, are once again responsible for the cooling of the North American currency. From the beginning of January until now, raw materials have already risen 13.5%, according to data from Fundação Getúlio Vargas (FGV).
The explanation for this is simple: if commodities become more expensive in dollars, the stronger the Real, since exporting countries receive more foreign exchange for these sales. For Rodrigo Lima, investment analyst and content editor at Stake, North American inflation, which ended 2021 at a high of 7%, helps to pressure commodity prices.
“Traditionally, commodities are a hedge [proteção] for inflation and they tend to perform better at these times”, he pointed out.
It is worth remembering that the return of the basic interest rate, the Selic, to the double-digit level (currently at 10.75%) makes investments in Brazil more attractive, not to mention that, looking at emerging markets, the domestic market passes through a moment of certain stability. The Stake analyst recalls that Russia faces a complicated situation – in the power struggle against the United States and NATO in the Ukraine crisis – and China is experiencing regulatory problems.
“Brazil appears to be in the final stages of its interest rate hike, with the Selic rate at more than 10%. If the United States and other economies are going to start raising interest rates, we already seem to be reaching the end of the cycle. Once you have reached the end of the cycle, the market has already sufficiently discounted this rise in interest rates in asset prices and people end up investing more in Brazil because of that”, says Lima.
How long will the dollar remain below R$5?
In the analysis of economists who make up the Market Focus Report, organized weekly by the Central Bank, the dollar will not be below R$ 5 until the end of the year. The latest survey, released on Monday (21), points out that the US currency should close 2022 at R$5.50 and should remain at R$5.36 in the projection for 2023.
Two points weigh in on this understanding: the monetary policy of the Federal Reserve (Fed), which should announce an increase in US interest rates as early as next month, and the Brazilian elections.
The Stake analyst assesses that everything will depend on how hawkish (intention to rise) the Fed will be in this promised interest rate hike to control US inflation. “When you raise interest rates, your currency tends to appreciate. The interest rate is nothing more than the cost of money”, commented Lima.
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