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Dollar opens lower but market remains cautious, with recession on the radar

THE dollar retreated 0.62%, quoted at R$ 4.951, around 9:22 am this Thursday (19), with the currencies of markets seen as riskier, in the case of Brazil, having a slight recovery after the losses the day before.

Investor fears that the world could face a global recession due to interest rate hikes to combat inflations records in several countries increases risk aversion, which favors the US currency over other currencies and stock exchanges, including those of U.S

The day before, the Dow Jones index, on the New York Stock Exchange, had the worst trading day since June 2020 falling 1,160 points mainly due to the drop in retail stocks, with balance sheets hampered by high inflation in the country.

In this auction, the central bank will auction up to 15 thousand traditional foreign exchange swap contracts for the purpose of rolling over the maturity date of July 1, 2022.

On Wednesday (18), the dollar rose 0.78% to R$4.981. already the Ibovespa closed down 2.34%, at 106,247.15 points.

global pessimism

The most recent instigator of global risk aversion was the interest rate hike in the US , announced by the Federal Reserve on May 4. Despite discarding hikes of 0.75 pp or a risk of recession, the municipality signaled at least two more hikes of 0.5 pp

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

Along with a series of interest rate hikes around the world, lockdowns in china to try to contain Covid-19, projections of a strong economic slowdown and even the risk of a global recession have increased, hurting markets and increasing investor risk aversion.

The growth of exports Chinese companies even slowed to single digits, the weakest level in almost two years, while imports barely changed in April, amplifying concerns.

However, with the prospect that these restrictions could be lifted between May and June, Chinese demand is expected to return to previous levels, which would once again favor commodity exporters and alleviate some of the pressure on the real.

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*With information from Reuters

Source: CNN Brasil

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