Markets Up, Dollar Down During Brazil’s Rousseff Impeachment Trial

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The U.S. dollar registered a steep devaluation while the São Paulo stock exchange rose on Monday as investors reacted to the deposition of suspended Brazilian President Dilma Rousseff in the Senate. The U.S. dollar closed the day at R$3.232/US$1, down by -1.21 percent on Monday after two sessions of appreciation last week.

In August the U.S. currency has fallen by 0.33 percent and during the eight first months of the year, by 18.13 percent. Brazil’s Central Bank sold US$500 million in foreign exchange swaps to contain the depreciation of the U.S. currency, but to no avail.

While the U.S. currency depreciated Brazil’s stock market, Bovespa, registered gains of 1.55 percent for the day, closing at 58,610 points. Petrobras stocks headed the rally, with gains of 1.54 percent in ordinary bonds and 2.55 percent in preferential stocks.

Analysts say that in addition to the impeachment trial of Brazil’s first woman president the foreign exchange rate was also influenced by statements made last week by one of the vice-presidents of the U.S. Federal Reserve indicating that the country may increase its interest rate until the end of the year.

On Tuesday and Wednesday, Brazil’s Central Bank (CB) directors will conduct their scheduled meeting and decide the new Selic (benchmark interest rate). Financial institutions surveyed by the CB stated that they expect the Selic to be maintained at 14.25 percent this month, but to be reduced in the coming meetings.

According to the Focus Bulletin released by the CB the market forecasts an end-of-year Selic of 13.75 percent.