Dollar operates in decline with favorable flow of investments to Brazil

O dollar fell 0.17%, quoted at R$ 5.024, around 9:25 am this Tuesday (30), with the continuity of an inflow of investments in Brazil benefiting the real which is approaching the level of R$ 5 despite the continued aversion to risks abroad, with concerns about the situation of the international economy.

The inflow of capital is supported by elements as a more positive perspective of demand for commodities and recovery in prices, favoring exporters like Brazil, a more positive domestic economic situation than initially expected, the apparent end of the cycle of high interest rates in the country and the attractiveness of assets discounted on the stock exchange.

The positive performance of the Brazilian market occurs even after the changes in investors’ bets in relation to US interest rates after the speech by the president of the Federal Reserve Jerome Powell at the Symposium of Jackson Hole .

the comments of Powell were considered harsh in relation to the inflation , reinforcing bets on an interest rate hike of 0.75 percentage point in September, which would be the third consecutive interest rate hike of this magnitude. The scenario is good for the dollar, but bad for stock markets around the world.

For some, the central bank will be less aggressive, with an increase of 0.5 percentage point, to impact less the country’s economy. Others point out that the economy is still buoyant, especially the job market, allowing for a more aggressive increase of 0.75 pp

O central bank will hold an auction of up to 15,000 traditional foreign exchange swap contracts in this trading session for the purpose of rolling over the maturity date of October 3, 2022.

On Monday (30), the dollar dropped 0.91%, to R$5.033. already the Ibovespa advanced 0.02%, to 112,323.12 points.

overall feeling

The global risk aversion of investors, 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 interest rate hike cycle in the United States. United.

The process of raising the US rate continued in July with a new increase of 0.75 percentage point. However, the Federal Reserve has signaled that it could make smaller hikes as the country’s economy already shows signs of slowing, 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 are also monitoring the situation of China’s economy, 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.

*With information from Reuters