Dollar exceeds BRL 5.35 with global risk aversion and Benefits PEC on the radar

O dollar rose 0.61%, quoted at R$ 5,358, around 12:00 pm this Tuesday (5th), favored by an aversion to risks while investors migrate to assets considered safer due to the deterioration of perspectives on the world economy.

Abroad, the cycle of interest rate hikes in United States – which fuels fears about a possible recession in 2023 – and the announcement of new lockdowns in China which tend to slow down the country’s economy and worsen the international situation.

In the domestic sphere, the market remains attentive to the processing of the Benefits PEC , which was approved in the Senate and is now being analyzed in the House. The text created a new fiscal risk, as it has estimated expenditures of around R$ 41 billion and envisages declaring a state of emergency to justify out-of-ceiling expenses and expand social benefits.

The measure was not well received by investors, and has led to a withdrawal of investments due to the possibility of uncontrolled spending.

In this trading session, the Central Bank will auction up to 5,315 traditional foreign exchange swap contracts for the purpose of rolling over the maturity date of August 1, 2022.

On Monday (4), the dollar closed up 0.07%, at R$ 5.325. already the Ibovespa fell 0.35% to 98,608.76 points.

overall feeling

Investors still maintain a strong global risk aversion triggered by fears about a possible general economic slowdown due to a series of interest rate hikes around the world to contain record levels of inflation, which would harm many types of investments.

The main cause for this aversion is the cycle of high interest rates in United States with the most recent increase announced by the Federal Reserve on May 4th. The autarchy has already ruled out 0.75 percentage point hikes in interest rates, or a risk of taking the country’s economy into recession, but signaled at least two more 0.5 pp hikes.

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.

At the same time, the market follows the data on the country’s economy to understand how aggressive the Fed could be in the process.

THE confirmation of the contraction of the US economy in the first quarter, for example, reinforced the view that the autarchy should not be as aggressive in raising interest rates as expected. already the may inflation signaled a more negative picture, reinforcing higher terminal interest bets.

On the other hand, with the end of lockdown in the city chinese from Shanghai and easing restrictions in the capital Beijing, Chinese demand was expected to return to previous levels, which again favored commodity exporters and relieved some of the pressure on the real, but new restrictions were announced.

The Ibovespa and the real found room for appreciation between the end of May and the beginning of June, but the combination of a worse domestic scenario with the return of a fiscal risk and the prospect of strong monetary tightening abroad once again harmed the Brazilian market. .

*With information from Reuters