Dollar drops as Pelosi’s visit to Taiwan ends and Copom meeting on the radar

O dollar fell 0.37%, quoted at R$5.259, around 9:30 am this Wednesday (3), amid a reduction in risk aversion on the part of investors with the end of visit of the President of the US Chamber, Nancy Pelosi to Taiwan.

The market focus in this session is the Monetary Policy Committee meeting (Copom ) of the Central Bank. The expectation is for a further increase of 0.5 percentage point in the basic interest rate, the Selic rate but with signs of the end of the cycle of increases started in March 2021, as inflation shows signs of falling.

O Chinese government announced who could retaliate if Pelosi visited Taiwan , which left the market apprehensive during the trip, which ended on Wednesday. The island seeks international recognition as a country and maintains diplomatic relations with the United States, but is claimed by China.

Of the 3,200 companies Taiwanese registered at customs China in the category of foods, 2,066 were listed as having “import suspended ” in retaliation for the visit. The Chinese government called Pelosi’s action a “a complete scam” and accused the United States of violating its sovereignty.

O central bank will hold an auction of up to 15 thousand traditional foreign exchange swap contracts in this trading session for the purpose of rolling over the maturity date of September 1, 2022.

On Tuesday (2), the dollar rose 1.93% to R$5.277, the highest daily high in three weeks and the highest level in a week. already the Ibovespa advanced 1.11%, to 103,361.70 points, its highest price since June 10th.

overall feeling

Strong global risk aversion by investors, triggered by fears about a possible widespread economic slowdown due to a series of interest rate hikes around the world to contain record levels of inflation, has eased in recent days, reflecting expectations of a cycle of interest rate hikes. less aggressive in the United States.

The process of raising the US rate continued in July with a new increase of 0.75 percentage point. However, the Federal Reserve has signaled that it may make smaller hikes as the country’s economy already shows signs of slowing, seeking to avoid a recession.

Higher interest rates in the United States attract investments to the country’s fixed income due to its high security and favor the dollar, but harm bond markets and stock exchanges around the world, including the US.

Investors also monitor the state of the economy of China , which also shows signs of a slowdown linked to a series of lockdowns in relevant cities. The Chinese government is expected to intensify an effort to stimulate the economy, which should help maintain high demand for commodities.

In the domestic scenario, the Benefits PEC which creates or expands social benefits with an estimated cost of R$ 41 billion, was poorly received by the market, as it reinforces the fiscal risk by bringing new spending above the ceiling.

The Ibovespa and the real were harmed by the scenario, but an apparent greater optimism in the market allows for a recovery, even if far from the levels of the first quarter of 2022, when they were benefited by the international scenario.

*With information from Reuters