In a new exchange rate report, BB chief economist Marcelo Rebelo raised his projection for the dollar.
Now, the house projection is R$5 for the dollar exchange rate.
“We believe that, relative to current levels, the second half of the year will be an environment in which the dollar will lose strength, as it becomes clear to investors that monetary easing is on the way, especially in the United States,” said Rebelo, during a panel at Previ Day, an event promoted by Previ, this afternoon in Sao Paulo.
He notes that this outlook was already stronger at the beginning of the year, but that the scenario together with the positive fundamentals here with foreign accounts improve expectations for the real.
On the contrary, underlines the chief economist, as regards the exchangethat there are fiscal and internal risks that may lead to volatility.
“This would also carry the risk of US elections, which could create a challenging environment for the global dollar,” he says.
Dynamics of interest, taxes and the dollar
Rebelo also draws attention to the fact that recently, regarding the revision of fiscal targets, the change was not significant in numerical terms, but the change itself had more repercussions than the message given.
“Compared to the last COPOM meeting, even though the result was in line with the market’s more cautious expectations (25 basis point reduction), the split decision between 25 and 50 points was what brought uncertainty to investors,” it is read.
“Beyond that, what had repercussions was the division between the older members, who voted for a 25-point cut, and the younger ones, who opted for 50 points. Reading the market, this could be the indication of a Bacen board of directors, especially from 2025 onwards, less combative towards inflation”, he adds.
With this, BB’s chief economist comments that “this interpretation happened” and was widely publicized.
“And this, added to the uncertainty about fiscal accounts, meant that the exchange rate showed a significant devaluation and inflationary expectations, already unanchored, showed a new deterioration”, he concludes, regarding the dynamics of interest and public finance which influences the dollar.
Source: Terra
Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.
