Dollar drops sharply with external relief and domestic elections on the radar

The dollar fell sharply this morning (10), following weakness of the US currency abroad as strong corporate balance sheets offset, albeit temporarily, fears of monetary tightening in the United States.

In Brazil, investors digested polls of voting intentions before the second round of elections. At 9:07 am (Brasília time), the dollar retreated 0.94%, to R$ 5.22 on sale.

In this session, the Central Bank will auction up to 16 thousand traditional foreign exchange swap contracts for the purpose of rolling over the maturity date of November 1, 2022.

This Wednesday (19), the Ibovespa index rose 0.46%, to 116,274 points, supported mainly by the shares of oil companies Petrobras, PetroRio and 3R Petroleum, which advanced 3.71%, 3.72% and 5.96% .

These increases were supported by the appreciation of oil. Analysts attributed the appreciation of the commodity to a speech by US President Joe Biden this Wednesday, which was considered mild about the country’s new measures to contain energy prices.

Biden announced the release of barrels from the country’s strategic reserve, but did not apply measures feared by the sector, such as the containment of exports.

The trend of rising raw material gained momentum after OPEC (cartel of producing countries) announced a few days ago that it would reduce production.

In the domestic exchange market, the spot commercial dollar advanced 0.41%, at R$ 5.2750 on sale. The US currency also showed strength against major global currencies.

In the American stock market, the S&P 500 index, a parameter for the New York Stock Exchange, dropped 0.67%. Dow Jones and Nasdaq, which are New York’s other leading indicators, fell 0.33% and 0.85%.

Data released on Wednesday on high inflation in Europe and the weakness of the US housing sector reinforced the prospect of a recession caused by more expensive credit.

Uncertainties about the economy tend to bring down stock exchanges and increase the dollar’s value because they lead more investors to invest in US fixed-income assets.

The benchmark US Treasury bonds reached an average yield of 4.12% on Wednesday and, as a result, renewed their highest level in 14 years. The benchmark interest rates negotiated by the market in Brazil for the coming years also rose in this session.

Pessimism about rising interest rates dampened the mood of US investors with results presented the day before by major banks and Netflix, whose shares soared 13% and recorded the best performance among the S&P 500 stocks.

The streaming giant reversed customer losses and added 2.4 million new subscribers worldwide in the third quarter, more than double what analysts expected.

Still on the American economy, data released this Wednesday showed that housing construction in the United States fell more than expected in September.

Numbers of housing loans, a very popular type of credit among Americans, reinforced that high interest rates already cause losses in this segment.

Mortgage applications fell for a fourth month, to the lowest level since 1997, while the 30-year fixed mortgage rate reached 6.94%, the highest level since 2002, according to the MBA (Association of Real Estate Bankers).

The Fed’s aggressive monetary policy has significantly weakened the housing market, with most indicators falling to levels last seen during the first wave of the Covid-19 pandemic in 2020.

In contrast, other sectors of the economy, such as the labor market, have shown resilience despite attempts by the US central bank to cool demand.

Since March, the Fed has raised its interest rate from near zero to a range of 3% to 3.25% a year, and it is now expected to end the year in the 4% range, with inflation still showing. signs of slowing down.

Data on Wednesday showed annual inflation in the UK hit 10.1% in September and returned to a 40-year high, repeating a record set in July. This puts more pressure on the Bank of England to raise interest rates.

Consumer inflation in September in the eurozone was revised from 10% to 9.9%, but is still at a record high, a result that also highlights market expectations of further increases in the cost of credit in Europe.

with Reuters