Dollar falls to R$5.058 after the BC’s first intervention since 2022; Stock market rises

What happened

BC announced up to US$1 billion in currency swap contracts at the session. The objective, according to the authority, was to meet part of the demand generated by the redemption of around US$3.6 billion in NTN-A3 public bonds, scheduled for April 15. Indexed to the dollar, the NTN-A3 has not been traded by the National Treasury for years, but there are still some institutions on the market that hold the paper in their portfolios.

It was the BC’s first intervention in the exchange rate since the end of 2022. A practice has an effect equivalent to the sale of dollars in the futures market and does not involve the foreign currency reserves of the country. A Today’s operation, however, should not be confused with the daily auctions that have been held by the BC to renegotiate June maturities.

In parallel, the market reflected new data from the USA. Industrial orders rose 1.4% in February, while the number of available jobs remained almost stable — data that helps investors guide their expectations for American interest rates. For now, the market sees a 62% chance that the Fed (Federal Reserve, the US Central Bank) will cut interest rates by 0.25 percentage points in June, according to the FedWatch tool.

Stable interest rates in the US tend to benefit the dollar. This happens because, with interest rates still at a high level, investors redirect resources to the American fixed income market, considered very safe. On the other hand, signs that the Fed will start reducing interest rates soon tend to boost riskier, but more profitable currencies, such as the real.

The BC is using as justification the maturity of debt securities on April 15th… But, in truth, it could have made this intervention at any time between the 2nd and the 15th. It is a fact that the recent devaluation of the real must be worrying the BC, which seeks to contain a more significant upward movement and reduce volatility in the exchange rate.
Leonel Mattos, analyst at StoneX, told Reuters