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Dollar falls against real eye on US stimulus measures

Posted by Marina

The dollar was hitting a fall against the real on Monday, a day marked by divided attention between Chinese-American tensions and US President Donald Trump's decrees to support the world's largest economy in the face of the coronavirus crisis.

After opening slightly higher at 10:24, the dollar fell 0.94%, to 5.3616 reais on the sale, while the most liquid future dollar contract fell 1.52%, to 5.3615 reais.

“Today, the financial markets show mixed behavior, with investors on the one hand optimistic with the disclosure of better-than-expected deflation figures from China and with Trump's“ punching ”in extending stimulus measures to his country, but, for another, pessimists in the face of growing tensions between this country and China, ”wrote Ricardo Gomes da Silva Filho, of Correparti Corretora.

Donald Trump signed on Saturday a series of decrees to offer additional economic relief to Americans affected by the pandemic, after his negotiators were unable to reach an agreement with Congress.

He said the measures will give an additional $ 400 a week to tens of millions of citizens who became unemployed during a health crisis that left more than 160,000 dead in the country, less than the $ 600 previously approved.

Still, the initial momentum of news for risky assets may be limited. "Despite the initial excitement with Trump's unilateral decision (...), investors began to question whether such executive orders would really be valid due to legal issues," warned Ricardo Filho.

In China, producer price deflation eased in July amid rising global oil prices and as industrial activity advances to pre-coronavirus levels, amplifying signs of recovery in the world's second largest economy.

But the tense climate between the Asian country and the United States raised concerns among investors ahead of August 15, when the two parties will meet to review the implementation of Phase 1 of their trade agreement and likely to share mutual complaints about their relationship.

Abroad, risky currency pairs of the real had mixed behavior, with Mexican peso and Australian dollar rising against the US currency, while South African rand and Turkish lira fell.

Meanwhile, in the domestic context, “the dollar had been sustaining the price in relative stability after a turbulent season, since strictly speaking the country should not have an increase in inflows and outflows of external resources throughout this year, and it is in a comfortable situation due to foreign exchange reserves in stock, ”said Sidnei Nehme, executive director of NGO Corretora.

But, “if the pandemic shows greater longevity and the government is forced to extend assistance programs to the needy population, increasing the fiscal deficit, and there is a prospect that the resumption of economic activity may be slower, it is possible that the pressure will impose a level higher dollar price, for motivating a defensive posture ”, he added.

During the year, although it left behind stressed levels close to 6 reais, the dollar still accumulates a gain of approximately 33% against the real amid the pandemic and an environment of extremely low interest rates.

In the last session, on Friday, the dollar traded on the interbank market closed up 1.30%, to 5.4126 reais on the sale.

The Central Bank will hold a traditional swap auction of up to 10,000 contracts maturing in November 2020 and March 2021 in this trading session.

Source: Agrolink