Dollar Closes Over R$4.20 for First Time in History

RIO DE JANEIRO, BRAZIL – The Dollar broke a new closing record on Monday, November 18th. After trading lower for much of the day, the currency changed direction and began to rise against the Real in the late afternoon, beating its historic mark of over a year ago.

The market monitored the new developments of the trade war between the United States and China and a Federal Supreme Court (STF) vote on a decision involving the former COAF.

The US currency climbed 0.30 percent, traded at R$4.2061 on sale. The currency’s previous highest exchange rate so far had been R$4.1957, at the close of September 13th, 2018.

In the last session, the dollar had reached R$4.2000 on the intraday trading (during business hours) but closed at R$4.1934 on sale. On the B3, where futures trades run until 6:15 PM, the dollar’s contract for higher liquidity had a 0.24 percent high, at R$4.2100.

Currency changed direction

Both the spot dollar and the futures dollar fell earlier when optimism prevailed regarding trade negotiations between the United States and China. The optimism was a reaction to the Chinese state agency Xinhua’s news that both parties had conducted “constructive negotiations” on trade, in a top-level phone call on Saturday.

Later, however, the CNBC television network reported that the mood in Beijing about a trade deal with the United States is pessimistic, due to US President Donald Trump’s reluctance to remove tariffs, which somewhat eased optimism on the issue.

Decision day at the STF

In Brazil, the dollar’s strength remained sustained by the lack of expectation of considerable capital inflow in the short term, after frustration with the foreign interest in the petroleum rights auction in early November.

Investors are awaiting the decision on Wednesday, November 20th, by the full bench of the STF on a ruling that determined the submission to the Court of reports from the former Financial Activities Control Council (COAF), currently the Financial Intelligence Unit (UIF) of the Central Bank.

The STF Presiding Justice, Dias Toffoli, had ordered the Central Bank to send the Court all the Reports on Financial Intelligence (RIF) and the Tax Representations for Criminal Purposes (RFFP) for the past three years. The measure could jeopardize the private financial information of over 600,000 people.

On Monday, the Central Bank sold 4,000 reverse currency swap contracts and US$200 million in spot currency, offering US$12,000 and US$600 million, respectively. The body also sold 8,000 traditional swap contracts to roll over the January 2020 maturity.

After the close of trading yesterday, November 19th, Justice Toffoli revoked his order, stating he had received sufficient information from UIF and the PGR, and had not needed to access the RIF and RFFP.

Source: Exame