The dollar closed lower against the real on Wednesday as the US currency fell overseas following the release of the minutes of the Federal Reserve’s latest monetary policy meeting, despite uncertainties over what the final text of the Transition PEC will look like have limited losses.
The US currency in sight fell by 0.17%, to 5.3709 reais on sale, after changing sign a few times during the session. The dollar fluctuated between 5.3450 (-0.65%) and 5.4134 reais (+0.62%) this Wednesday.
The minutes of the latest US central bank policy meeting showed that a “substantial majority” of policy makers agreed that it would “probably be appropriate soon” to slow the pace of interest rate hikes.
The index comparing the dollar against a basket of six strong pairs accelerated its losses in the wake of the release of the minutes and, by around 4:50 pm (Brasilia time), fell by 0.9%.
A moderation in the pace of interest rate hikes by the central bank would likely give room for riskier currencies to appreciate, experts say, as it would make the interest rate differential between the United States and other economies less favorable to the largest economy in the world.
Despite the fall of the dollar on Wednesday, Leonel Mattos, market intelligence analyst at StoneX, cited the persistence of “an environment of uncertainty and caution on the part of investors due to the lack of consensus on the text of the Transition PEC”.
The PEC — which the elected government of Luiz Inácio Lula da Silva seeks to approve to allow extra-ceiling spending starting next year — is expected to be postponed yet again due to the lack of consensus on the exception period for the program Bolsa FamÃlia of the spending ceiling, after the umpteenth meeting of the Political Council for the transition, said the president of the PT Gleisi Hoffman this Wednesday.
The elected government initially proposed in the PEC an extra-ceiling of almost 200 billion reais for an indefinite period, but most of the markets hope that the text can be reduced in the negotiations with Congress.
Senator Marcelo Castro (MDB-PI), general rapporteur for the 2023 Budget, told Reuters on Wednesday that the PEC will have to include expenses of at least 100 billion reais outside the ceiling, with the risk that the accounts will become unenforceable.
If an overly aggressive fiscal spending scenario consolidates, “the exchange rate, which is the relatively quiet variable right now, will get much worse,” said Gustavo Arruda, head of Latin America research at France BNP Paribas bank, at a press conference this Wednesday.
“It’s kind of the part we’re missing to see a more negative scenario. The exchange rate is a worrying variable because it hasn’t moved much yet” amid growing domestic fiscal risks, Arruda said.
He drew attention to severe stress in the futures market, where rates on major DIs have skyrocketed rapidly amid PEC uncertainties, also pricing in fresh interest rate hikes by the Central Bank next year.
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Source: Terra
Camila Luna is a writer at Gossipify, where she covers the latest movies and television series. With a passion for all things entertainment, Camila brings her unique perspective to her writing and offers readers an inside look at the industry. Camila is a graduate from the University of California, Los Angeles (UCLA) with a degree in English and is also a avid movie watcher.
