Dollar falls below BRL 5.20 with favorable flow, following retreat abroad

O dollar fell 0.30%, quoted at R$5.190, around 9:25 am this Friday (9), following a weak performance abroad after the most recent interest rate hike in the euro zone and with the real benefited by an inflow of investments amid a positive domestic economic scenario.

The day before, the European Central Bank (ECB ) raised the deposit rate of the euro zone , the most important interest rate in the group, by 0.75 percentage point to 0.75%. The magnitude was the highest since the euro began to circulate, and the market interpreted the signals from the autarchy as tough in fighting inflation, helping the currency against the dollar.

In Brazil, the Broad Consumer Price Index (IPCA ) in August had deflation of 0.36%, the second in a row. As a result, the index accumulates high of 8.73% in 12 months . The more positive inflationary scenario, combined with the prospect of approaching the end of the discounted interest and asset cycle, makes the Brazilian market more attractive to foreign investors.

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 October 3, 2022.

On Thursday (8), the dollar fell by 0.63%, at R$5.20. already the Ibovespa rose 0.14% to 109,915.64 points.

overall feeling

Investors’ global risk aversion, triggered by fears about a possible generalized economic slowdown due to a series of interest rate hikes around the world to contain record levels of inflation, has varied in intensity depending on expectations about the cycle of interest rate hikes in 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 signaled that it could make smaller increases as the country’s economy already shows signs of deceleration, seeking to avoid a recession.

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

Investors also monitor the state of the economy in China , which also shows signs of a slowdown linked to a series of lockdowns in relevant cities. The expectation is that the Chinese government will intensify an effort to stimulate the economy, while facing difficulties to reverse a situation of low consumption by the population, which impacts the country’s demand for commodities.

Even so, the Ibovespa and the real found room for recovery with an improvement in the mood of the market, supported by the positive outlook for commodities, a stronger domestic economic scenario and a reduction in the perception of risks in relation to the elections. The scenario, however, may change depending on the degree of risk aversion abroad.

*With information from Reuters