After three consecutive rises, the dollar spot closed at a firm low against the real this Thursday, with investors adjusting positions after the strong technical pressure seen the day before and due to optimism abroad, in the wake of the advance in Chamber of the U.S of the project that suspends the government debt ceiling.
The spot dollar closed the day quoted at 5.0069 reais on sale, down 1.29%. It was the biggest percentage drop since April 27, when it had dropped 1.56% in a single day.
At B3, at 17:39 (from Brasilia), the dollar futures contract for the first month fell 0.94% to 5.0375 reais.
The dollar fluctuated low against the real throughout this Thursday.
In part, the quotes retreated amid an adjustment of positions of some agents in the futures market, after long investors (positioned on the high dollar) have boosted prices on Wednesday, for the formation of the end-of-month Ptax.
In addition, the fall in Brazil was in line with the retreat of the dollar against other currencies abroad, due to the optimism after the approval in the US House of the bill that suspends the debt ceiling of 31.4 trillion dollars.
The proposal passed with majority support from Democrats and Republicans and will now head to the Senate, which is expected to enact the measure before Monday’s deadline, when the government is expected to run out of money to pay its bills.
“As soon as the debt ceiling agreement was resolved in the US, US short-term interest rates fell. This is because most likely the Federal Reserve will no longer raise interest rates”, pointed out José Faria Júnior, director of the consulting firm Wagner Investimentos.
In fact, at the end of the afternoon, US government bonds priced around a 71% chance that the Fed would keep its base rate in the range of 5.00% to 5.25% per annum at its June meeting. The probability of an increase of 0.25 percentage points was priced in at around 29%.
“There was a complete Fed pricing change. The market is convinced that the institution will not raise interest rates. At the Brazilafter the Ptax and with the repricing on the Fed abroad, it is natural for the dollar to fall”, added Faria Júnior.
This drop in the spot dollar in Brazil was in line with the retreat of the US currency against other emerging currencies or exporters of commoditiessuch as the Australian dollar, the Mexican peso and the Chilean peso.
At 5:39 pm (Brasília time), the dollar index – which measures the performance of the US currency against a basket of six currencies – fell 0.58%, at 103.550.
In Brazil, in the morning, the central bank sold all 16,000 traditional FX swap contracts offered in the rollover of July maturities.
In the afternoon, the Foreign Trade Secretariat of the Ministry of Development, Industry, Commerce and Services reported that the Brazilian trade balance recorded a surplus of US$11.378 billion in May, the best result for every month in the historical series.
Also in the morning, the Brazilian Institute of Geography and Statistics (IBGE) reported that Brazil’s Gross Domestic Product (GDP) grew 1.9% in the first quarter compared to the previous three months. This represents a strong recovery after the economy contracted 0.1% in the last three months of 2022. The GDP data, however, did not decisively influence the dollar.
Due to the most recent results, the government’s projections for the commercial sector in 2023 may improve, according to the secretariat. The numbers indicate that, in the commercial area, the country continues to attract the North American currency.
Source: Moneytimes
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