Dollar Closes at R$5.24, Highest in Nine Days, While Oil and Stock Prices Retreat

RIO DE JANEIRO, BRAZIL – On Wednesday, April 15th, the currency closed at R$5.242, up R$0.052 (+1 percent). This was its highest since April 6th, when the quotation had closed at R$5.292.

The price increased throughout the session. At the high of the day, around 12 noon, the currency pulled in at R$5.26. The dollar has accumulated a 30.64 percent increase in 2020.

The Central Bank (BC) intervened in the market. As in recent days, the monetary authority has rolled over US$1 billion in foreign exchange swap contracts, equivalent to the sale of dollars in the futures market.

Stock Market

The tensions in the exchange market were reflected in the stock market. After two bullish days, the B3 (Brazilian stock exchange) IBOVESPA index closed the day at 78,831 points, down 1.36 percent. The indicator followed the international stock markets. The Dow Jones index, on the New York Stock Market, closed the day down 1.86 percent.

For several weeks now, financial markets all over the planet have been experiencing a tense period due to the global recession triggered by the worsening of the novel coronavirus pandemic. The interruptions in economic activity associated with the restriction of social activities are holding back production and consumption, leading to instability.

On Tuesday, April 14th, the International Monetary Fund (IMF) announced that the global economy, as measured by Gross Domestic Product (GDP, the sum of goods and services produced in the country), would drop by three percent in 2020. Projections are worse for Brazil, with the international body expecting a 5.3 percent contraction this year.

Oil

Questions about the agreement among the members of the Organization of Petroleum Exporting Countries (OPEC) continue to pressure the markets. On Sunday, April 12th, the countries in the group signed an agreement to reduce global production by 10 million barrels per day in May and June.

However, concern about the worldwide drop in demand caused by the pandemic and the reluctance of companies and governments to join the agreement are influencing international barrel quotations.

By 7:30 PM, the Brent crude benchmark was sold at US$27.69, down 6.45 percent, its lowest price since April 2nd. Petrobras’ shares, the most traded on the stock market, retreated. Ordinary shares (with voting rights at shareholders’ meetings) dropped 3.26 percent on Wednesday. Preferred stock (with preference in dividend distribution) fell 2.09 percent.

The oil price war erupted a month ago, when Saudi Arabia and Russia increased production, despite declining prices. Two weeks ago, the price of a barrel of Brent crude oil was close to US$20, its lowest in 18 years. According to Petrobras, the extraction of oil in the deepwater pre-salt layer is only viable for prices at or above US$45.

Source: Agência Brasil