Dollar rises on Russia sanctions, market cautious awaiting Fed minutes

O dollar rose 0.11%, quoted at R$4.664, around 9:23 am this Wednesday (6), with investors around the world more cautious as they wait for the release of the minutes of the last monetary policy meeting of the Federal Reservewhich should give more clues about the next steps in the cycle of interest rate hikes in the United States.

Market expectations have converged around an increase of 0.5 percentage point, instead of 0.25, as the US economy faces the highest inflation in over 40 years. The rise would make the fixed income of U.S more attractive, withdrawing investments from markets such as Brazil.

Also on the radar is the possibility of imposing new sanctions against Russia on the part of European Union and the United States, following an announcement earlier this week in which the European bloc banned imports of Russian coal.

The target this time would be the gas sector and Petroleumwhich can further increase commodity prices, worsen the scenario of inflation and demand a more aggressive global monetary policy, a favorable outlook for the dollar.

In Brazil, investors continued to monitor the Central Bank civil servants strike and the possible impact of the movement, in particular the possibility of a 5% readjustment for public servantswhich would represent more government spending and raise fears of fiscal uncontrol, a scenario that increases market caution.

On Tuesday (5), the dollar rose 1.10%, quoted at R$ 4.65, with the real having the third worst performance among the main currencies in the world. already the Ibovespa retreated 1.97%, to 118,885 points.

Petroleum

Since the invasion of Ukraine by Russia on the 24th of February, the markets for Petroleum show the highest volatility in two years, with commodity prices reaching levels last seen in 2008.

The commodity has fluctuated in the range of US$ 100 and US$ 110 in recent days. On the one hand, the market expects lower demand due to new lockdowns in china and the prospect of a Longer interest rate hike in the United Stateswhich would slow down the country’s economy.

At the same time, any news about the war influences prices, feeding or reducing fears of supply problems and affecting prices.

However, compared to previous years, oil remains at high values ​​and rose more than 30% in the first quarter, due to the mismatch between supply and demand for the commodity, with the main producers, gathered in the OPEC+, not yet resuming pre-pandemic production levels. The picture was intensified with the tensions in europe.

commodities and real

The surge in commodities with the conflict in Eastern Europe favors the Brazilian market, and its effects have helped to overcome risk aversion with the war in Ukraine, which has benefited the real so far.

The cycle is linked, in part, to the rise in oil and iron ore due to high demand amid the economic recovery. At the same time, high interest rates in Brazil, the view of assets being discounted on the stock exchange and the exit from other emerging markets are combined with the rise in commodities and explain the appreciation of the real this year.

Another factor behind this movement is expectations of more pro-growth measures in the China that are raising hopes of a recovery in demand for metals, which has led to higher prices, reinforced by the crisis in Ukraine.

However, Chinese government interventions in the market and a new outbreak of Covid-19 in the country with lockdowns still generate downward pressures, in an up and down in the price, which remains at high levels.

War in Ukraine

Follow CNN’s live coverage of the conflict.

With the war in Ukraine completing a month, Ukrainian forces have been trying to reclaim territory from the Russians in recent daysaccording to a senior US defense official — who described them as “able and willing” to do so.

Russia and Ukraine have held negotiating rounds to try to end the conflict, but to no avail. The Ukrainian president signaled that the country would accept a neutrality statusa Russian demand, but no territorial concessions, and Russia spoke of progress in the talks.

Western countries implemented new economic sanctions against Russia after the release of images of bodies of abandoned Ukrainian civilians in the city of Bucha after the withdrawal of Russian forces. The European Union has banned the import of coal and the entry of Russian ships into ports in the bloc, and is considering, together with the United States, restricting the import of natural gas and oil from Russia.

From an economic point of view, the sanctions with the greatest economic impact on Russia are linked to the expulsion of Russian banks from Swifta global means of payment processing.

*With information from Reuters