Yesterday fell to the lowest price of the year and closed down 0.13%, at R$ 5.5286. During the day, the American currency came close to the technical support of BRL 5.50.
The deceleration of the dollar’s fall occurred in the late afternoon and responded to the signal deterioration in international markets. New York stock exchanges fell as much as 2%, which reduced losses against a basket of currencies, and interest rates on US Treasury benchmark bonds fell to the day’s lows, underlining the climate of risk aversion.
CHECK OUT: US Treasury Bond Yield Curve
Currency markets need to pay more attention to bond yields than short-term interest rates. The recent rally in central country sovereign bond rates served as a constraint on liquidity, which could potentially affect the outlook for emerging market assets such as Brazil’s currency.
We cannot forget that there are still internal factors such as fiscal risk and election as a potential source of setbacks to the Brazilian exchange rate.
The year 2022 begins with many uncertainties, whether in the external scenario, in which we see the beginning of a process of tightening monetary policy in the US, or in the internal scenario, in which we have a presidential election and all the complexity that this involves, amidst a sharp downturn in the economy.
The local operations yesterday reflected the strong downward adjustment of the US currency abroad, given the perception that the US will not be even more aggressive in the process of normalizing its monetary policy than expected.
The market understood that even higher interest rates abroad will not generate a significant reduction in liquidity in emerging markets.
There is also relief that the damage to Omicron’s shock growth may be limited.
Data today: in Brazil and in . We will have a speech by the President of the European Central Bank (ECB) Christine Lagarde. Also speech by , member of Fomc.
Good business to all! Keep commenting to enrich our analysis and interactions are always welcome.