The dollar began to fall sharply this Monday and was below 5.15 reais at the lowest levels of the session, while investors warned of the possibility of volatility in the exchange markets on the eve of monetary policy meetings of the central banks of Brazil and States. United.
At 13:40 (Brasília time), the spot dollar retreated 2.11%, to 5.1501 reais on sale, and went to 5.1452 reais at the lowest of the session (-2.20%) changing markedly after earlier to have risen 0.82%, to 5.3038 reais.
Some traders have said in recent trading sessions that levels above 5.30 reais are interesting for selling dollars by exporters and other financial agents. The US currency’s fall this Monday comes after the currency closed the last session with its highest price since the beginning of August, at 5.2609 reais, jumping more than 2% in the accumulated last week.
It is normal, after very sharp movements of the dollar, to have specific moments of correction in the opposite direction. The real had the best overall performance against the dollar in this trading session among a basket of the world’s main currencies.
On B3, at 1:40 pm (GMT), the dollar futures contract with the first maturity fell 2.00% to 5.1665 reais.
The change in the sign of the US currency to negative in the local market also accompanied the deceleration of the rise of a dollar index against a basket of six strong rivals abroad, which rose 0.18% around 13:45 (GMT) after jump 0.58% at maximum.
At the same time, some risky currency pairs of the real, such as the Australian dollar and the South African rand, reduced their declines in the trading session, while the Mexican peso returned initial losses and operated in the black.
Jefferson Rugik, CEO of Correparti Corretora, also cited improvement in the local stock market as a factor in boosting the Brazilian real. After faltering in the opening, the Ibovespa gained momentum and rose 1.6% around 1:50 pm.
Still, investors remained nervous and warned of volatility ahead of the Federal Reserve’s monetary policy meeting, which starts on Tuesday and ends on Wednesday.
Money markets take a near-certain 0.75 percentage point adjustment to the Fed’s base rate, with some traders betting on the possibility of an even more intense adjustment, a full 1 point.
The more aggressive the Fed is at its meeting this week, the more the dollar tends to benefit globally.
In that context, Citi said in a report on Monday that it expects the global rally for the US currency – which recently hit 20-year highs against developed country pairs – to continue, “even if the higher-quality currencies of the Latin American exchange rates may continue to outperform due to the ‘carry’ (interest rate return)”.
The real has been highlighted by several financial institutions as one of those currencies that has performed better among emerging markets for offering attractive returns in “carry trade” strategies, which consist of borrowing in a low-interest country and investing that money in a more profitable market.
The Monetary Policy Committee (Copom) of the Central Bank of Brazil holds a meeting in the next two days, as does the Fed, and most financial markets expect the Selic rate to be maintained at the current level of 13.75%. However, there are those who expect a residual interest rate increase to 14%.