The dollar advanced more than 1% in the first trades on Thursday (29), operating comfortably above R$5.40 as investors continued to fear a possible global recession, while the approach of the first round of presidential elections in Brazil contributed to the caution.
At 9:06 am (GMT), the spot dollar advanced 1.08%, at R$ 5.4072 on sale.
On B3, at 9:06 am (GMT), the dollar futures contract of the first month rose 0.67%, to R$ 5.4090.
This Wednesday (28), the dollar fell against the main world currencies and the largest stock markets on the planet showed a strong rise with the reaction of investors to the announcement of the Bank of England, the monetary authority of the United Kingdom, that it would buy bonds from the British government in any amount needed to stabilize the market.
The move put a stop to a runaway sale of UK debt that has slammed the value of the pound sterling against the dollar in recent days.
The crisis that the Bank of England is trying to calm was triggered last week by a tax cut plan announced by the British government, whose expected effect is to heat up the economy in exchange for the country’s indebtedness.
This sent a negative message to the market, that the country is against the fight against inflation. On the other side of the Atlantic, investors looking for safety flocked to US Treasuries, which sent the dollar soaring.
Relief only came on Wednesday, after the British central bank’s announcement. The index that compares the US currency to its major peers fell 1.21%, its first drop in more than a week.
In Brazil, the commercial dollar closed negative at 0.52%, quoted at R$ 5.35.
The pound and euro, which have accumulated strong declines this year against the dollar, closed with sharp rises. The British currency advanced 1.73% to $1.0861.
That was the first rise after nine straight declines. Even so, the accumulated loss this year against the dollar is 17.82%.
The euro gained 1.25% to hit $0.9702, the first rally for the European common currency after seven sessions lower.
Meanwhile, yields on US Treasury bonds maturing in ten years, the benchmark for the global interest rate market, retreated to 3.7% after breaking the 4% barrier. This move shows investors slightly decreasing their dollar positions and looking for other overly undervalued currencies and assets.
Jaime Valdivia, chief international economist at Galapagos, commented that the British monetary authority needed to make money available to the market to “avoid movements so abrupt that they could destabilize the financial market in general”, he said.
The British central bank also added that it would postpone the start of its bond sale program, which was scheduled for next week, Reuters reported.
Equity markets, which were volatile throughout the day, ended in the blue. On the Brazilian Stock Exchange, the Ibovespa index rose by just 0.07%, to 108,451 points.
Some analysts considered that the local market was cautious due to the approach of the vote of the first round of the elections and, therefore, did not embark on the optimism of Wall Street.
In New York, the S&P 500 benchmark jumped 1.97%. Dow Jones and Nasdaq gained 1.88% and 2.05%, respectively.
with Reuters
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