Dollar has stable opening, after recent skyrocket

The dollar fluctuated between slight highs and lows against the real in the first trades this Wednesday (4), with investors adjusting positions after the recent rise of the American currency to a peak in five months, in the face of fears about the economic agenda of President Luiz Inácio Lula da Silva (PT).

At 10:19 am, the spot commercial dollar retreated 0.11%, to R$ 5.4450 in the sale. On the Stock Exchange, the Ibovespa index rose 0.29%, to 104,469 points.

On the eve, the dollar and interest rates hit new highs, while the stock market showed a sharp drop, in yet another day of negative reactions to the initial actions of President Lula’s government.

Investors turned their attention throughout this Tuesday (3) to the speeches of the new Minister of Finance, Fernando Haddad, who intensified concerns that political decisions override the need to balance public accounts.

There was a worsening of the indicators, however, in the late afternoon, after the Minister of Social Security, Carlos Lupi (PDT), said that he wants to create a commission to review the Social Security reform approved in the government of Jair Bolsonaro (PL).

Fears abroad regarding the slowdown of the global economy also contributed to the aversion to risky investments, further damaging Brazilian assets, mainly in the oil exploration and distribution sector.

The American currency closed up 1.77%, quoted at R$ 5.4520 on sale, the highest value since the end of July. The Ibovespa retreated 2.08%, to 104,165 points.

Before Lupi’s statement worsened the market’s mood, the indicators already showed a strong reaction to statements made by Haddad earlier in the day.

The finance minister said this Tuesday that he will present President Lula with a flight plan with short, medium and long-term actions for the economic agenda of the new administration. “I am going to present a huge set of actions to him, of decisions that he will have to take, one by one”, said Haddad

Haddad also downplayed the reactions of the financial market the day before. “People are appropriating the numbers and what happened in Brazil in 2022. There was a climate that the economy was on the right track and this climate is being undone by the presentation of the numbers of the huge electoral gap left by Bolsonaro”, said Haddad.

Market analysts report that there is distrust about the minister’s autonomy and the extent to which economic decisions will be influenced by the government’s political sector.

On Monday (2), the financial market had already shown dissatisfaction with President Lula’s inauguration speech and first actions. The reading made by analysts is that there are signs that the government will be more interventionist in the economy than expected, with consistent use of public companies.

Expectations also worsened with regard to the control of public spending, a feeling that gained strength after the announcement of the maintenance of the exemption for two months for gasoline and ethanol, and for one year for diesel, biodiesel and cooking gas.

During the inauguration, Lula called the spending cap “stupidity”, and said that it will be revoked. The measure was already foreseen by the Spending PEC, which raised the ceiling and allowed spending outside of it, but established that the Executive must present a new rule for public accounts to replace the current one.

Abroad, the main markets showed a slight decline after the extended New Year’s holiday. In New York, the benchmark index of the Exchange, the S&P 500, yielded 0.40%. The Dow Jones and Nasdaq indicators fell by 0.03% and 0.76%, respectively.

In the oil market, a barrel of Brent was traded at the end of the afternoon with a drop of 4.13%, quoted at US$ 82.36 (R$ 443). The raw material is a reference for the prices charged by Petrobras, whose most traded shares on the Brazilian Stock Exchange fell 2.53%.

Analysts consulted by the Bloomberg agency attributed the aversion to risk investments to the fear of a global recession, especially in light of growing concerns that the increase in cases of Covid in China will result in a new closure of economic activities and break in distribution chains.

Despite the negative exterior, uncertainty about the local economy is the main reason for the devaluation of the real and the Ibovespa, according to Nicolas Borsoi, chief economist at Nova Futura.

“It is becoming clear that the government does not have a fiscal plan and that the political wing is pushing for more fiscal stimuli, like the exemption of fuels”, said Borsoi.