Dollar rises more than 1% after Lula’s speeches about BC and before US employment data

The dollar rose sharply against the real shortly after opening this Friday (3), with investors reacting negatively to criticism by President Luiz Inácio Lula da Silva of the independence of the Central Bank, while the market also awaits the release of an employment report of the United States government.

At 9:09 am (Brasília time), the spot dollar advanced 1.27%, to R$ 5.1097 in the sale, close to zeroing the losses that accumulated in the week.

At B3, at 9:09 am (Brasília time), the first contract dollar futures contract rose 1.13%, to R$ 5.1300.

This Thursday (2), the currency closed at R$ 5.04, the lowest level since August 29, 2022.

The sharp drop was driven by the Central Bank’s decision to maintain the Selic (basic interest rate) at 13.75% per annum and by the entry of foreign flows into the Brazilian market.

The tough tone of the autarchy in justifying its decision, warning of fiscal uncertainty and inflationary pressure, was read by analysts as a sign that interest rates should not fall this year —thus making the Brazilian currency attractive to foreign investors.

The retreat of the dollar was also driven by the decision of the Federal Reserve, the US central bank, to raise its interest rate by 0.25 points, a slowdown in relation to previous increases to combat inflation.

The uncertainties in the political and fiscal scenario, however, still bring volatility to the exchange rate, says Cristiane Quartaroli, economist at Banco Ourinvest.

President Luís Inácio Lula da Silva’s renewed criticism of the spending cap, which included the possibility of revising the Central Bank’s independence, sent the dollar higher shortly before the close. The currency was traded this Thursday at R$ 4.94.

With Reuters