Dollar operates in fall with PEC of Fuels and US interest on the radar

THE dollar fell slightly this Monday (7), reflecting a favorable external scenario with investors migrating to markets seen as more resilient and linked to commodities, and a still favorable perception for the real at the local level.

At around 9:21 am, the US currency was down 0.12% to R$5.315. The dollar futures contract traded on B3 of first maturity fell 0.27%, to R$ 5.313.

In the previous week, the dollar closed with a fall of 1.24%, in the 4th consecutive week of decline. already the Ibovespa amended the fourth straight week of high, with an advance of 0.29%.

Brazil

In the domestic scenario, investors’ attention is focused on the risks of a fiscal lack of control on the part of the federal government, currently represented by the so-called PEC on Fuels, which would suspend taxes on these products.

A market analyst defines that the perception is that the government is going for all or nothing, and should move towards more populist measures to increase its popularity until the elections.

According to the projection of the XP analysis team, the PEC can reduce the collection between R$ 70 billion and R$ 100 billion. However, the government is already discussing including only diesel in the text, without gasoline.

If in fact the exemption is restricted to diesel, the loss of collection should fall from R$ 70 billion to R$ 20 billion. Analysts assess that the market can react well to a more modest subsidy – but they do not rule out the pressure for more exemptions.

Two PECs on the subject have already been filed, one in the Senate and another in the Chamber, and should be discussed this week. One would involve tax breaks to reduce fuel prices. According to the policy analyst at CNN Caio Junqueira, the proposals were made by Centrão without consulting the Minister of EconomyPaulo Guedes.

In this auction, the central bank will auction up to 15,000 traditional foreign exchange swap contracts to roll over on April 1, 2022.

abroad

On Friday (4), the release of the US Non-Farm Employment Payroll report surprised the market with a generation of job vacancies higher than projected, reinforcing the forecast that the Federal Reserve will raise the country’s interest rates in March. The expectation impacts the price of the North American currency.

At the same time, foreign investors have carried out a process of migration to areas linked to commodities and for emerging markets, which favors Brazil and the real, as the Brazilian stock exchange has a large number of companies linked to the sector.

Expectations of more pro-growth measures in the Chinawhile bearish economic pressures persist, hopes are rising for a pick-up in demand for metals, analysts said, leading to higher prices.

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, tensions in Ukraine affect prices.

The movement is also linked to the perspective that the fed will raise interest rates in the country at the March meeting, as investors migrate from the country’s equities to markets and assets seen as more resilient and cheaper.

Any rise in interest rates in the country, however, may affect investments in Brazilas it makes US Treasury bonds even more attractive to investors.

*With information from Reuters