RIO DE JANEIRO, BRAZIL – The dollar once again hit closing records against the real on Wednesday, April 22nd, after almost three weeks of gains.
The US currency’s bullishness was driven by expectations that Brazil would again cut the basic SELIC interest rate and with investors pricing the movement the day before, when the Brazilian market was closed for the holiday and most risky assets depreciated due to greater instability in the oil industry.
As a result, the dollar was up 1.89 percent and closed at R$5.409. At its highest, the US currency reached R$5.410, also renewing its intraday record. The tourism dollar rose 0.5 percent to R$5.63.
Gustavo Cruz, a strategist at RB Investments sees recent comments by Central Bank President Roberto Campos Neto as indicative that the SELIC may drop again. “They are no longer ruling out the option of continuing the cut cycle. The reduction in interest rates seems to be more palpable,” he said.
Although lower interest rates can help boost the economy, they also reduce the attractiveness of Brazilian bonds compared to those of countries that pay higher premiums – which drives away speculative foreign capital and, consequently, reduces the number of dollars in the country.
The Brazilian exchange market also felt the effects of the preceding day, when emerging currencies depreciated more than two percent against the dollar, influenced by the oil market. “We corrected the backlog,” said Vanei Nagem, an exchange analyst at Terra Investments.
Despite investors’ concerns over the price of “black gold,” the external scenario showed signs of recovery. On Wednesday, the WTI oil futures, which traded negative earlier this week, climbed almost 20 percent, while Brent oil, a benchmark for Petrobras’ pricing policy, was up six percent.
Abroad, part of Wednesday’s upswing was owed to the approval of the US Senate’s US$484 billion stimulus package. The bill, which provides aid to small businesses and hospitals, still needs to be passed by the House and signed by President Donald Trump to come into force.
Source: Exame