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Dollar exceeds R $ 5.62 with global caution and domestic fiscal risks

Posted by Marina

The dollar surpassed the 5.62 reais mark on Thursday morning in the wave of caution registered in the last trading session, with global fears about a jump in the Covid-19 cases and local fiscal risks leading investors to seek refuge in the currency North-American.

At 10:50, the dollar advanced 0.36%, to 5.6076 reais on sale, after reaching the level of 5.6250 reais.

The most liquid future dollar contract rose 0.46% to 5.617 reais.

In the last session, the spot dollar had risen 2.18%, to 5.5876 reais on the sale. The move was a reflection of widespread risk aversion in international markets after an acceleration in the spread of the coronavirus led to the adoption of new restrictive measures in the United Kingdom, generating fears that more important economies will again limit their activity in the face of the advance of the pandemic.

Continues after form

Flávio Serrano, chief economist at Haitong bank, cited a cooling in the dollar buying movement this morning after the surge registered the day before, but stressed that “there is still a sense of caution both domestically and internationally, amid the risk of a second Covid wave ”.

On Thursday, the index accompanying the US currency against six pairs of wealthy countries hovered highs in two months, reflecting the search for protection in safe assets. Risky currencies whose movement the real tends to follow, such as the Mexican peso, the South African rand and the Australian dollar, were operating in decline.

In Brazil, analysts continued to cite fiscal risks and political and economic uncertainties as a pressure factor for the real, which remains in the worst performing currency position in the year among a basket of more than 30 US currency pairs.

Only in the last five trading sessions, counting this, the dollar accumulates a jump of about 7.4% against the Brazilian currency, valuing around 40 cents since closing at 5.23 reais last Thursday.

"The speed of valuation reflects the external risk, and with the local fiscal risk everything is exacerbated," said Flávio Serrano. "The key point is that there is a lot of volatility derived from a high level of uncertainty."

The main fear of domestic investors revolves around the spending ceiling, as there are doubts about how the government of Jair Bolsonaro would finance a social assistance program without stressing public accounts.

The government leader in the Chamber of Deputies, Ricardo Barros (PP-PR), said on Wednesday that management will maintain the spending ceiling and fiscal rigor and that there will be no proposals to increase the tax burden.

This Thursday, the Central Bank of Brazil made reference to the spending cap rule in its Quarterly Inflation Report, saying that there is little or no space to cut the Selic ahead, with the rise in basic interest rates being discarded since maintained the framework for inflation and the discipline of public accounts.

Source: Agrolink