Dollar drops below R$5 with inflation and projects on fuel prices

O dollar retreats this Friday (11) and is heading for a new weekly drop, with the result of the Broad Consumer Price Index (IPCA) in February above expectations, reinforcing bets on an interest rate hike of 1 percentage point in the next Copom meeting, next week. High interest rates favor the real, helping to maintain its attractiveness for foreign investors.

Bills that seek to contain the rise in fuel prices also influence the behavior of the dollar. The Congress approved a proposal that changes the ICMS calculationwhile another that creates a price stabilization fund already passed the Senate and needs to be analyzed in the Chamber.

Despite representing additional expenses for the government, the approval was seen as positive by the market as it should prevent the advancement of proposals that would have even greater fiscal risks.

Around 9:29 am, the US currency retreated 0.46%, quoted at R$ 4.992. The first-maturity dollar futures contract traded on B3 had a fall of 0.39%, to R$ 4,991.

On Thursday (10), the dollar rose 0.09%, quoted at R$ 5.017. already the Ibovespa retreated 0.21%, to 113,663.13 points.

Petroleum

O Petroleum closed the second day down, with the Brent type at US$ 109, falling 1.63%. The day before, the commodity closed in sharp low after robust highs in the session on Tuesday (8). The war in Ukraine remained in the focus of investors and influencing prices.

André Perfeito, chief economist at Necton, says that the oil drop comes after “news indicate that there will be more oil production by countries like Iraq to mitigate the effects of the Russian oil embargo”.

“It is worth noting that we are in a period of high volatility and these movements are normal, so we cannot guarantee that this fall in raw materials will continue”, he says.

You oil prices have been discharged since the Russia invaded Ukraine. Analysts believe the recent frenzy may be just the beginning, as warnings of $200 a barrel begin to spread across the market.

The commodity has reached its highest level since 2008 on Monday (7), when Western countries began to consider an embargo on Russiathe second largest exporter in the world.

On Tuesday, Brent crude, which has soared 8.07%, reduced its closing gain to 3.87%, after the announcement of ban on import of Russian commodity by the United States and across the UKwhich should increase the supply shock of the product in the coming days.

The main factor for the increase is the mismatch between supply and demand for the commodity, with the main producers, meeting in OPEC+, still not resuming pre-pandemic production levels, and the situation was intensified with the tensions in europe.

commodities

Still as a consequence of the Russian invasion of Ukraine, there is a rise in the prices of other commodities, mainly those linked to Russia and Ukraine, corn, wheat, in addition to oil.

Wheat rose by 7% on Monday, and accumulates appreciation of 75% in the year. According to Necton, the appreciation of the real may reduce this increase to close to 55%.

Even so, the real continues to benefit from an investment migration cycle started in 2022 to markets linked to commodities and seen as cheap, like Brazil, by stimulating the search for the dollar, also favored by the high interest rates in the country.

The cycle is also linked, in part, to expectations of more pro-growth measures in China that are raising hopes of a recovery in demand for metals, which has led to higher prices, reinforced by the crisis in Ukraine.

On the other hand, interventions by the Chinese government in the market have generated downward pressures, in an up and down in the price.

War in Ukraine

Follow CNN’s live coverage of the conflict.

Two weeks after Russian President Vladimir Putin invaded Ukraine, the country’s ground forces are working to seize territory, with the Ukrainian capital Kiev holding out much longer than previously anticipated.

On Thursday, a meeting between top diplomats from Ukraine and Russia there was no advance on the issue of a 24-hour ceasefire to help civilians. Already on Friday, the Russians claimed to have taken over a city north of the port of Mariupol, one of the focuses of the onslaught in the country.

From an economic point of view, the main event involving the conflict is the series of sanctions announced by the United States and its Western allies.

Among them are the expulsion of Russian banks from Swifta global payments system, and the freezing of reserves by the central bank of Russia.

Countries that support Ukraine have already said they must implement new sanctions against Russia, which has seen its currency, the ruble, plummet and reach a historic low.

Putin, on the other hand, claimed that the sanctions westerners against russia are not legitimate and that governments are deceiving their own people. He also stressed that the country would resolve its problems calmly.

The VIX, called the “fear index” for trying to measure the degree of market volatility, has dropped back to around 30 points, after reaching its highest level since September 2020.

*With information from Reuters