Dollar lowers with lower risk aversion amid Ukraine invasion

O dollar falls this Friday (25), with the market reducing the aversion to risks linked to Russia’s invasion of Ukrainewhich favors currencies like the real, which already was in a cycle of appreciation due to high interest rates in Brazil and the search for discounted markets linked to commodities.

At around 9:26 am, the US currency had fallen by 0.24%, quoted at R$5.092. The first-maturity dollar futures contract traded on B3 retreated 0.58%, to R$ 5.093.

On Friday (25), the dollar rose 2.03%, quoted at R$ 5.104, interrupting four sessions in a row. already the Ibovespa fell by 0.37%, to 111,591.87 points.

bags abroad

the bags of Asia, where negotiations have already ended, recovered this Friday, following the movement of North American indices the day before. The Nikkei index, the main stock market in Japan, rose 1.95% to 26,476.50 points.

South Korean Kospi advanced 1.06% in Seoul, at 2,676.76 points, and Taiex gained 0.33% in Taiwan, at 17,652.18 points.

In mainland China, the Shanghai Composite was up 0.63% to 3,451.41 points, and the less comprehensive Shenzhen Composite gained 1.21% to 2,310.07 points. Exception, the Hang Seng fell 0.59% in Hong Kong, to 22,767.18 points.

In Oceania, the Australian stock market rose slightly, after suffering its biggest single-day drop since September 2020, of almost 3%. The S&P/ASX 200 gained 0.10% in Sydney at 6,997.80 points.

the bags too recover in Europewith the STOXX 600 index, which brings together major stocks from 17 European countries, up about 2% after reaching its lowest level since May 2021.

US U.Sthe futures of the three main stock indices – Nasdaq, S&P 500 and Dow Jones – retreat in pre-market trading, but still far from the movements seen the day before.

Ukraine

THE Russia launched a full-scale invasion of Ukraine on Thursday (24)starting a war in the region. This Friday, Russian troops approaching the Ukrainian capitalKiev, with expectations of new clashes in the city.

The action generated reactions from world leaders and, according to Joe Biden, President of the United States, the biggest economic sanctions ever imposed in history against the country led by Vladimir Putin.

The sanctions promised by the US and allies are still under development, but some have already been announced over the course of Thursday:

• Limit Russia’s ability to do business in dollars, euros, pounds and yen to be part of the global economy;
• Limit ability to finance and increase Russian armed forces;
• Impair your ability to compete in the high-tech economy of the 21st century;
• Sanctions against Russian banks that together hold about $1 trillion in assets.

The invasion, and the chances of further escalations in the geopolitical scenario, increase risk aversion of investors and the search for the dollar. On Friday, with the market recovering, the DXY index, which compares the currency against others, hovers around stability.

Also reflecting an apparent reduction in risk aversion in the market, the so-called “protection” assets, as they are less volatile, such as the Swiss franc, the gold and silver retreat, returning gains.

The VIX, called the “fear index” for trying to measure the degree of volatility in the market, is up about 1%, around 30 points, after reaching its highest level since September 2020.

Another consequence of the invasion is the rise in commodity prices, especially those linked to Russia and Ukraine, such as corn, wheat and oil. The Brent type, Petrobras’ benchmark for pricing policy, is on the brink of stability, after surpassing US$100 a barrel for the first time since 2014.

commodities

The situation in Ukraine had not yet overcome the benefits for the real of a cycle of investment migration to markets linked to commodities and seen as cheap, with Brazil also benefiting from high interest rates, which limits the effects of bets on a high policy. aggressive interest rate Federal Reserve. However, that could change.

The cycle was linked, in part, to expectations of more pro-growth measures in China that are raising hopes of a recovery in demand for metals, which leads to higher prices. On the other hand, interventions by the Chinese government in the market have generated downward pressures, in an up and down in the price.

In the case of oil, analysts at Goldman Sachs say that Brent-type prices should surpass $100 per barrel in this year. The main factor for the increase is the mismatch between supply and demand for the commodity, with the main producers, gathered in OPEC, still not resuming pre-pandemic production levels. At Ukraine tensions also drive prices higher.

Another factor that weighed on this movement is the expectation of interest rate hikes in U.S in March, of 0.25 or 0.5 percentage point, reinforced by inflation data slightly higher than expected. As a result, foreign investors have withdrawn from the US stock market.

With US inflation hitting a four-decade record, the Fed has been giving the markets tougher indications, but the minutes of the bank’s last meeting did not make clear the size and rhythm of the grip that the US central bank will make, indicating that decisions will occur at each meeting due to the economic context.

Any interest rate hike in the country may affect investments in Brazilas it makes US Treasury bonds even more attractive to investors, putting negative pressure on the real.

Brazil

On investors’ radar is also the so-called Fuels PEC, which would allow the suspension of taxes for these products. Representing a possible lack of control of expenses, the topic has the potential to negatively affect the real and the Ibovespa.

Two PECs have already been filed, one in the Senate and another in the Chamber, with calculations of loss of revenue ranging from R$ 18 billion to R$ 100 billion depending on the content, but the focus at the moment is two bills on the subject whose vote was scheduled for the next day 8.

One of the PLs determines a fixed ICMS charge for fuels, with the state tax no longer varying following product price fluctuations, and expands the so-called gas voucher for Brazilian families.

The other would create a fund to stabilize the price of oil and derivatives (diesel, gasoline and LPG), with a new policy of internal sales prices for distributors.

*With information from Reuters