By José de Castro
SAO PAULO (Reuters) – The dollar rose again on Wednesday and closed above 5.90 reais for the first time in history, just 1.67% from the psychological level of 6 reais, amid a negative day in the markets and with local operations again further affected by the climate of discouragement with the economy and political noise.
The spot dollar closed up 0.61%, at 5.9012 reais on the sale, the highest nominal record for a session close.
At the peak of the day, the rate was 5.9445 reais, an intraday record.
As on the previous day, the dollar fell earlier, reaching 5.8189 reais, down 0.80%. But at the end of the first hour of trading, the currency started to gain strength, until it started to rise and remain high throughout the day, despite interventions by the Central Bank via foreign exchange swap contracts.
In B3, the future dollar was up 0.10%, to 5.8980 reais, at 5:28 pm, after reaching 5.9505 reais.
The search for the security of the American currency occurred as investors continue to see little reason to bring massive capital to Brazil.
The day began with data on a drop in retail sales in March. In Itaú Unibanco’s accounts, the fall was 13.7% for expanded retail.
At around 10 am, statements by Federal Reserve chairman Jerome Powell were interpreted by market players as worrying signs for the coming months, which made risky assets worse around the world.
But, on the exchange side, the real remained at the bottom among its peers. Analysts noted the resurgence of a fairly common “trade” months ago – “purse and dollar purchases”. In fact, exporting companies – which benefit from a weaker exchange rate – held back the downward pressure from giant Petrobras (SA 🙂 and helped it close close to stability in this session.
The demand for these securities on the stock exchange highlights the prospect that the dollar will continue to rise, due to the combination of a collapsing economy, falling interest rates to new lows, fiscal deterioration and renewed political uncertainty.
Credit Suisse also calls attention to “generally very limited” interventions by the Central Bank in the foreign exchange market. With the dollar climbing to 5.94 reais in this session, the Central Bank sold $ 880 million in traditional foreign exchange swap contracts in this session, a volume lower than that of many days in April, when the dollar was below current levels.
For the Swiss bank, all signs point to a further worsening of investors’ perception of the real, which, in Credit’s view, today basically depends on external factors so that it experiences some relief.
“Taking these risks into account, we put our short-term target for the dollar at 6.20 reais, well above (shown) by the three-month futures contracts, around 5.91 reais,” the bank said in a note to customers.
Bank of America also outlined a more negative scenario for the real, which is expected to depreciate at 5.85 per dollar until the end of the year (compared to a previous projection of 5.20 reais). The bank justified the review by “the sharp deterioration of the economic and political scenario in recent weeks, as well as the extreme monetary easing”.
“However, we note that several factors can easily pull the dollar above 6.0 reais in the short term: deterioration in global risk appetite in the wake of negative economic data; number of Covid-19 cases in Brazil continuing to accelerate; or noise domestic politician, “bank officials said in a note.
The bank saw a 7.7% contraction in GDP this year.