The dollar rises again and closes at R$ 4.77, keeping an eye on interest rates in Brazil and Powell’s statements in the US.
The US currency rose 0.08%, selling at R$ 4.7717. The dollar closed higher on Thursday (22) after fluctuating between gains and losses for most of the session. The day was marked by the repercussion of the interest rate decision made by the Monetary Policy Committee (Copom) of the Central Bank of Brazil, which maintained the…
The US currency rose 0.08%, selling at R$ 4.7717.
The dollar closed higher on Thursday (22) after fluctuating between gains and losses for most of the session. The day was marked by the repercussion of the interest rate decision made by the Monetary Policy Committee (Copom) of the Central Bank of Brazil, which maintained the Selic rate at 13.75% per year for the 7th consecutive time.
Statements by the President of the Federal Reserve (Fed), Jerome Powell, also remained in focus.
At the end of the session, the US currency advanced 0.08% to R$ 4.7717. See more exchange rates.
On the previous day, the dollar had fallen by 0.57% to R$ 4.7679. With today’s result, the currency has accumulated the following declines:
-0.97% for the week;
-5.94% for the month;
-9.59% for the year.
In the stock market, the Ibovespa index closed lower and fell below 120,000 points.
What’s moving the markets?
The Copom decided on Wednesday (21) to maintain the basic interest rate, Selic, at 13.75% per year for the seventh consecutive time. In the statement, the committee stated that the current situation still requires “caution and moderation.”
According to analysts consulted by G1, the Copom’s statement was even stricter than expected regarding the conduct of monetary policy in the country.
Investors and analysts were expecting the Copom to signal a reduction in the basic interest rate in its statement after Wednesday’s meeting, which did not happen.
Although the committee removed the indication that further interest rate hikes could occur from the document, it has not yet given any signs of a potential cut in the Selic rate in future meetings and continues to suggest that the basic rate could remain high for a “prolonged period.”
“The committee made it clear that the next steps in monetary policy will depend on the evolution of economic data. It came in a less dovish tone than anticipated. The door [to a potential interest rate cut] was opened, but not wide open,” said Rodolfo Margato, an economist at XP.
The projections of the majority of banks and other financial institutions pointed to interest rates starting to decline in August. However, analysts are still divided between August and September for the beginning of interest rate cuts.
In the market’s interpretation, the committee’s more conservative indication suggests the possibility of a more cautious easing in the short term, which could favor a lower rate in the longer term.
According to the latest edition of the Focus Bulletin, a report by the Central Bank that provides a median of economists’ expectations for Brazilian economic indicators, the Selic rate is expected to end the year at 12.25% per year – 1.50 percentage points lower than the current level.
Internationally, investors are monitoring the statements of the Federal Reserve (Fed) President, Jerome Powell, in a Senate committee. Yesterday, in testimony to the House, Powell reiterated that further interest rate hikes in the US could come this year.
Additionally, markets were also awaiting the monetary policy decision of the Bank of England (BoE). The BoE decided by a majority to raise its benchmark interest rate by 0.50 percentage points to 5%, the highest level since April 2008.
UK inflation in May remained at 8.7%, the same as in April, but with an increase in core inflation to 7.1%. This is the highest reading in over 30 years, driven by the services sector and wage increases caused by a tight labor market.
In a statement, the BoE states that further rate hikes may occur if inflation shows more signs of resilience in the coming months. However, the bank’s baseline scenario is for inflation to decrease throughout the year.
Source: https://g1.globo.com/economia/noticia/2023/06/22/dolar.ghtml