Dollar opens lower as investors watch for tensions between Ukraine and Russia

O dollar falls this Friday (18), heading for the sixth week followed by a fall as the real is favored by high interest rates in Brazil and a favorable flow of foreign investment. On investors’ radar are tensions between Ukraine and Russia, which could favor the US currency in the event of a worsening.

At around 9:21 am, the dollar dropped 0.16% to R$5.158. The first-maturity currency futures contract traded on B3 retreated 0.31%, to R$ 5.156.

On Thursday (17), the dollar rose 0.74%, quoted at R$ 5.166. already the Ibovespa retreated 1.43%, to 113,528.48 points.

abroad

The possibility of an invasion of Ukraine by Russia continues to affect markets. The Russian Defense Ministry said that some troops located near Ukraine are returning to their basesbut Western countries dispute this version and say the numbers at the border are increasing.

Russia too expelled the deputy ambassador of the United States in the country, and there is information about conflicts in eastern Ukraine involving separatists who, according to the West, have Russian support.

The increased possibility of a Russian invasion of Ukraine – with a response from the United States and allies – increases risk aversion of investors and leads to the search for the dollar.

However, the scenario still does not overcome the benefits for the real and the Ibovespa of a cycle of investment migration to markets linked to commodities, with Brazil also benefiting from high interest rates, which limits the effects of bets on a policy of high aggressive interest rate Federal Reserve.

The cycle is 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, Chinese government interventions in the market have led to recent declines.

In the case of oil, analysts at Goldman Sachs say that Brent oil prices are expected to exceed US$ 100 a barrel this year. According to them, the oil market remains in a “surprisingly large deficit” as the effect of the Omicron variant of coronavirus in demand for the commodity is, so far, lower than expected. In addition, the Ukraine tensions drive prices upalready above US$ 90.

Another factor that weighs 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 left the US stock market and migrated to other visas such as more resilient or cheaper.

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 call 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 that can be voted on. next week.

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.

In this trading session, the Central Bank will auction up to 15,000 traditional foreign exchange swap contracts to roll over the maturity date of April 1, 2022.

*With information from Reuters