Dollar drops 0.21%, to R$ 5.1014

The dollar was rehearsing low in the first trades in the spot market this Tuesday (14), settling down amid a calmer day in the global exchange markets after the strong stress of the day before that in Brazil led the currency to the highest high. In a month.

At 9:04 am (Brasília time), the spot dollar retreated 0.21%, to R$ 5.1014 on sale.

On B3, the first-maturity dollar futures contract dropped 0.30% to R$5.1285.

The dollar index against a basket of rich countries dropped 0.1%. The dollar lost 0.2% against a group of emerging currencies

This Monday (13), investors traded under the fear that the lack of control of global inflation will lead the main economic powers into recession.

The Ibovespa index, reference for the Brazilian Stock Exchange, sank 2.73%, to 102,598 points.

Among the companies with the highest volume of negotiations in the country, Eletrobras (-2.20%), Vale (-3.17%), Petrobras (-1.28%) and Itaú (-1.20% ).

The domestic results reflected the negative day abroad. On the New York Stock Exchange, the benchmark S&P 500 plunged 3.88%.

Two other important US market indices, the Dow Jones (which tracks 30 high-value companies) and the Nasdaq (focused on mid-sized companies in the technology sector) tumbled 2.79% and 4.68%, respectively.

The world financial market remains shaken by recent data on US inflation, whose higher-than-expected rise revealed last Friday (10) could influence monetary authorities around the world to further accelerate their respective interest rates.

This situation, in general terms, tends to value strong currencies, especially the dollar, and withdraw investments from shares of companies traded on the stock exchanges.

This Wednesday (15), the Fomc (monetary policy committee) of the Fed (Federal Reserve, the American central bank) will conclude its two-day meeting and inform its decision on the pace of interest rate hikes in the country.

On the same date, Copom, the committee responsible for formulating the Brazilian Central Bank’s monetary policy, will also present its decision on the country’s basic interest rate, the Selic.

Monetary tightening — which means making credit more expensive to cool consumption and slow down inflation — in the United States also increases the yield on US Treasury bonds, considered the safest investment on the planet.

This leads investors to reduce their investments in riskier markets, such as the Stock Exchanges. It is a time when the market wants to take advantage of the most attractive fixed income in the US.

This increase in the flow of dollars towards sovereign bonds in the United States makes the currency more scarce and expensive, causing a chain reaction in the business world.

In emerging economy countries, such as Brazil, the rise in the dollar raises import costs and triggers inflation.

Central banks are forced to raise interest rates to convince investors that the return offered by their sovereign bonds is worth the risk they take by not bringing their dollars to the US.

In the Brazilian interest futures market, for example, the DI rate (Interbank Deposits) maturing in January 2023 jumped this Monday from 13.37% to approximately 13.54% per year.

The index is traded only between banks, but reflects the sector’s expectations for the Selic’s direction, in addition to serving as a reference for the credit sector.

The main problem with this movement is the lack of liquidity in the market, since investors now have the chance to obtain comfortable gains with high interest paid by fixed income all over the world. The money that comes out of the stock exchanges is needed by companies, as they lose capital with the fall of their shares and stop growing and generating jobs.

But the current crisis is even more difficult to face because the credit crunch is not the only remedy capable of curbing inflation. Still as a result of the stoppages of activities caused by the Covid pandemic, the world faces a lack of goods and inputs.

The rise in prices, therefore, would also need to be tackled by increasing supply. But there are at least two major impediments to normalizing the global trade of goods.

Firstly, China, which concentrates much of the world’s industrialized goods production, maintains severe restrictions on the operation of companies to try to contain infections by the coronavirus.

In addition, the war in Ukraine reduced the supply of oil and made the price of raw material soar, as Russian production was banned from the United States and part of Europe. Also due to the conflict, Ukraine’s grain production faces obstacles to be shipped, collaborating with the global increase in food prices.

In addition to the stock exchanges, other investments considered risky suffer losses when the market perceives a less favorable environment for the so-called variable income.

This Monday, bitcoin fell to the lowest level in 18 months, closing the day below US$ 23 thousand (about R$ 117 thousand).

with Reuters