Dollar should stay at $ 3.90 next year

Posted by Marina
According to Rabobank, the US Dollar is expected to close this year at $ 4.00, then start to fall back to the $ 3.90 level at the end of 2020. This is what the study “Prospects for Brazilian agribusiness 2020 ”, released this week by the financial institution specialized in this segment.

“As for the exchange rate, amid local challenges (risks of further reform) and an unfavorable global context (eg economic slowdown, trade tensions), we project an exchange rate of 4.00 per dollar at the end of this year and 3, 90 per dollar by the end of 2020, ”says Rabobank's report.

According to this analysis, the sharpest deceleration in the major economies of the world, as well as a possible worsening of 'bell-American' trade tensions or even a setback regarding the fiscal reform agenda in Brazil, may devalue the Real against the US Dollar.

On the other hand, the bank points out, positive surprises regarding the process of macroeconomic adjustments, inflows of funds due to new concessions and privatizations, and the resumption of monetary easing by the central banks of the major economies, may appreciate the Real. against the dollar.

Assuming moderate volatility in financial conditions and the advance of necessary reforms, the bank says, GDP growth of 0.9% is projected in 2019: “This would continue the current scenario of gradual recovery in economic activity, employment and of consumption. For the benchmark interest rate (Selic), we project the end of the 4% easing cycle by mid-2020. We believe inflation will rise from 3.3% this year to 3.8% next year and remain below BC's central target (4.25% in 2019 and 4.00% in 2020) ”.

According to the financial institution, “just controlling the growth of mandatory retirement spending is not enough to ensure a sustainable path to public debt in the short term. Other tax measures, such as administrative reform and the creation of mandatory expense adjustment mechanisms in fiscal emergency situations, for example, are of equal importance and are already being addressed by the economic team. ”

“The approval of pension reform with comfortable margin of vote in both houses can be a good omen, since it seems to explicit the convergence of the Executive and Legislative around the urgency of the fiscal situation. In addition, the current administration seems to understand the need to tackle other bottlenecks in the Brazilian economy in parallel. Formal independence from the central bank, advances in privatization and concessions, tax reform, simplification of regulations, improved business environment and the breakthrough of foreign trade via new trade agreements are examples of how much remains to be done, ”he said. points out Rabobank.

“In the event of setbacks or frustrations in continuing adjustments, current market optimism tends to reverse, leading to worse market conditions and economic expectations. The financial impacts could be felt at any time, depending on investor patience and overall financial conditions, ”he concludes in his study.

Source: Agrolink