by Fabricio de Castro
SÃO PAULO (Reuters) – The spot dollar continued its latest downward move against the real in Brazil on Tuesday as prices reacted to news of economic stimulus announced in China and price deceleration in the United States.
The spot dollar ended the day trading at 4.8622 reais for sale, down 0.12%. This is the lowest closing price since June 6 of last year when it closed at 4.7959.
On the B3, at 17:16 (Brasilia time), the first dollar futures contract fell by 0.07%, to 4.8785 reais.
Earlier in the day, the US currency reacted to the announcement that the People’s Bank of China cut its seven-day reverse repo rate by 10 basis points to 1.90%, by injecting 2 billion yuan (279.97 million dollars) in the system. It was the first cut in this short-term lending rate in ten months, with the aim of restoring market confidence and supporting the country’s post-pandemic recovery.
As usual, the stimulus announced by China favored the currencies of commodity exporting countries, such as the Brazilian real, sending the dollar lower.
This bearish trend for the dollar has amplified since 9:30 am, when the US Department of Labor announced that the consumer price index (CPI) rose 0.1% in May, after rising by 0.4% in April. In the 12 months to May, the index rose 4.0%, the lowest level on this comparison basis since March 2021, following a 4.9% increase in April.
The data strengthened the idea of some price accommodation, which would give the Federal Reserve room to interrupt – at least this month – the current cycle of high interest rates in the US.
“The market believed that the CPI could change the context of the Fed’s decision on Wednesday, but confirmed expectations of a deceleration in inflation. Therefore, the CPI has not marred the recent rally in overseas variable income and has ensured the dollar fell broadly this Tuesday,” commented Commcor DTVM Financial Derivatives Desk Manager Cleber Alessie Machado.
“China’s data favored commodity exporter currencies and commodities themselves,” he added.
At the lowest price of the day, at 10:05, the US currency reached 4.8481 reais (-0.41%). About an hour later, at 11:15 am, the currency hit a high of 4.8800 (+0.24%), but the market was again unable to sustain a dollar rally.
The currency ended up returning to the negative range, continuing the most recent downward movement against the real, influenced by external influences and with market operators withdrawing risk premiums from their quotations due to optimism on the evolution of the new framework tax in Brazil.
In the latest stretch of spot currency activity, however, the dollar has moved closer to stability.
“US inflation data confirmed bets that the Fed would hold interest rates this Wednesday. As a result, we saw this dollar drop in the morning. But we are still in an environment of expectation and caution a because of the Fed’s decision”, reflects the economist Cristiane Quartaroli, of Banco Ourinvest.
Abroad, at the end of the afternoon, the US currency continued to depreciate against the Canadian dollar, the Chilean peso and the Mexican peso.
At 17:16 (Brasilia time), the dollar index – which measures the performance of the US currency against a basket of six currencies – fell 0.29%, to 103.280.
In Brazil, in the morning, the Central Bank sold all 16,000 swap contracts on traditional exchange rates offered in the rollover of the August maturities.
(edited by Isabel Versiani)
Source: Terra
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