Markets are again pressured by local anguish; dollar surpasses R$5.40 and DIs jump 20 basis points By Reuters

© Reuters. US Dollar Bills 02/08/2011 REUTERS/Yuriko Nakao

SAO PAULO (Reuters) – Gained strength at the end of the morning, abandoned its earlier fall and returned to surpassing 5.40 reais this Monday, on a day of renewed pressure on the interest rate market and weakness in the stock market, still amidst the indigestion of the market in the face of the strained political-fiscal climate in Brazil.

Guide Investimentos noted that the institutional environment in Brazil remains “troubled” after President Jair Bolsonaro filed a request for impeachment of a STF minister on Friday. In addition, the weekend’s news suggests to investors that the government will need to spend time to resolve crises with other Powers, with the risk, therefore, of leaving aside the reform agenda desired by the market.

In parallel to this, the Central Bank of Planalto to its formal autonomy, sanctioned by law this year, but not movement or direct pressure from President Jair Bolsonaro against the newly acquired status, two sources of the monetary authority told Reuters, on condition of anonymity.

On Friday, the Associated Press news agency reported that Bolsonaro confided in interlocutors that he regretted the autonomy law, which he signed in February.

The dollar in cash had a positive variation of 0.10% this Monday, to 5.3903 reais, after reaching 5.4023 reais (+0.32%). The currency spent most of the morning on a low, touching a low of 5.345 reais (-0.74%).

In interest rates, the rates returned to show a strong increase of more than 20 basis points after a truce on Friday, when they still returned only part of the surge from previous days generated by fiscal fears.

Strong demand for — a bond that protects against — has helped keep DIs up as the B3 nominal forward market serves as a “hedge” for real interest positions.

A sign of greater investor risk perception, the spread between the January 2027 and January 2023 DI rates rose by 6 basis points in this session, to 166 basis points, returning much of the 8 basis points drop of the sixth -fair.

In the stock market, it clashed with its peers and dropped 0.6%, expanding the month’s drop to 3.7% and on the way to hitting the second month of losses.

(By José de Castro)

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