O dollar 🇧🇷USDBLR) jumped against the real this Monday, amid investor fears that the amount of extra-ceiling expenses included in the Transition PEC will remain close to 200 billion reais, while signs of resilience in the U.S. economy United States supported the strength of the US currency.
The spot US currency advanced 1.35%, to 5.2844 reais on sale. This was the highest daily percentage gain since November 25 (+1.84%) and the highest closing level since last Tuesday (5.2883).
Senate and House leaders agreed this Monday morning that the text of the Transition PEC will be in effect for two years and that the proposal will maintain the original value proposed, which may open an exception to the spending ceiling of up to 198 billion reais to fund O Bolsa Familiaamong other points, and investments next year, said the general rapporteur for the 2023 Budget, Marcelo Castro (MDB-PI).
“All this articulation and the possibility that it is a PEC approaching 200 billion reais or putting a lot of things outside the ceiling beyond the Brazil Aid (future Bolsa Família) generates this appreciation of the dollar,” Felipe Izac, partner at Nexgen Capital, told Reuters.
Investor concerns about spending pursued by the elected government have been exacerbated by the lack of definition of who will be finance minister in Luiz Inacio Lula da Silvafigure that could help in the negotiation of the Transition PEC, say specialists.
Lula has already said that he should only announce the names of his ministers after the presidential ceremony, on December 12th. Former São Paulo mayor Fernando Haddad is currently seen as the favorite to take over the Ministry of Finance.
“Precisely because it is a much more political than technical name, (Haddad) would demonstrate greater fiscal uncertainty”, said Izac.
Overseas, stronger-than-expected data from the service sector in the United States triggered a generalized worsening in the mood of global markets, fueling the rise of the dollar against the real.
The Institute for Supply Management (ISM) reported on Monday that the PMI for the US services sector rose much more than expected in November, which may reinforce fears that the Federal Reserve will follow aggressive in tightening monetary policy in order to cool the economy and contain inflation.
In the wake of the data, the index that compares the dollar to six strong currencies soared 0.85% this afternoon.
Back in Brazil, investors were waiting for the meeting of the Central Bank’s Monetary Policy Committee, which will begin on Tuesday and end on Wednesday.
Although there is consensus in the market that the Selic rate will be maintained at the current 13.75%, investors will be attentive to any indication from the Copom on how the current fiscal uncertainties may affect decisions to raise interest rates.
“The Copom should reinforce its cautious stance with the ongoing disinflationary process, perhaps raising the tone about the possibility of interest rate hikes”, said Citi in a report, although it has as its base scenario the maintenance of the Selic rate this week.
Faced with the prospect of strong spending by the elected government, the Brazilian interest rate curve even priced new Selic increases in 2023, while the most recent weekly Focus survey by the Central Bank suggests a less intense monetary easing over the next year.
Despite the short-term uncertainties, “the baseline scenario for the real is good,” said Nexgen’s Izac. “We are experiencing a wave of commodity appreciation and we have a real interest rate that is among the best in the world, so the basic scenario is of a stronger real, increasingly closer to 5 (per dollar)”, evaluated the specialist. .
“What the market doesn’t like is the lack of definition. From the moment you have a better fiscal definition, whether good or bad, the market begins to adapt and can catch up”, added Izac.
Source: Moneytimes
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