Dollar falls against the Real, but local uncertainties limit losses
The dollar retreated against the real on Thursday, following the movement of the currency in international markets, given lower expectations that the Federal Reserve will start raising interest rates as early as June, but reduced losses throughout the morning amid persistent concerns about the political and economic situation in Brazil.
At 12:01 pm, the US currency fell 0.45 percent, to 3.1336 reais on the sale, after falling more than 1 percent and reaching 3.0764 reais in the session low. According to BM&F data, the financial turnover was around 22.4 million dollars.
“The dollar is weakening today as market players consider the risk that the dollar’s recent strength will slow the rate of interest rate hikes (in the US),” Scotiabank analysts Eric Theoret and Camilla Sutton wrote in a note to customers.
“In the most recent (Fed) minutes, the strength of the dollar was mentioned; the main concern is with the possibility of putting temporary downward pressure on inflation,” they added.
The dollar retreated globally in this session, as maintaining lower interest rates in the US would maintain the attractiveness of securities from other countries. That outlook gained more strength this morning after weak data on US retail sales.
But investors remained apprehensive in the Brazilian market, amid fears that political resistance to President Dilma Rousseff would further hamper fiscal adjustment. Doubts about the future of the Central Bank’s foreign exchange intervention program, scheduled to last until at least the end of this month, also supported concerns.
“The ‘queen volatility’ continues to reign,” said Correparti broker Jefferson Luiz Rugik.
BC
The day before, the uncertainty about the BC’s performance gained more body after the Treasury accepted, in an exchange auction for National Treasury Notes – Series B (NTN-Bs, securities adjusted for official inflation), offers for National Treasury Notes – Series A3 (papers indexed to exchange variation).
The transaction helped raise the dollar in the past session, as investors who held these securities went to the market to hedge their exposure. In addition, the auction strengthened the perception that the government understands that the dollar should rise further.
“If the government thinks that the dollar may rise more, it is better to pay the exchange rate variation now than that which may come,” explained the securities trader of a national broker. This perception, in turn, reinforced expectations that the BC may not extend its daily intervention program.
“Before, you had the BC holding the exchange rate by leaps and bounds. Now, you have indicated that you are going to let the dollar go where it is needed to balance the economy,” he added.
The BC sold the total foreign exchange swap offer through this morning’s daily auction, placing the equivalent of $ 98 million on the market. 1,400 contracts were sold for December 1, 2015 and 600 for March 1, 2016.
The monetary authority also sold the full offer in the rollover auction for the swaps due on April 1. So far, about 32 percent of the total lot has been rolled out, which corresponds to 9.964 billion dollars.