Dollar accumulates strong rise against the real in the week with risks on BC

The dollar fluctuated between stability and a slight drop against the real this Friday morning (10), but was still on track to close the week with strong gains, with investors still showing concern about the possibility of the Central Bank giving in to criticism from the government on the conduct of monetary policy.

At 10:35 am (Brasília time), the spot dollar retreated 0.31%, to R$ 5.2575 in the sale, returning initial gains.

On B3, at 10:35 am (Brasília time), the first contract dollar futures contract fell 0.71%, to R$ 5.2720.

The currency’s negative bias this morning was attributed by some market participants to a technical adjustment movement, after the currency promptly surpassed the BRL 5.30 mark earlier in this session. Jefferson Rugik, CEO of Correparti Corretora, also said that exporters took advantage of the high level of the dollar to go to sales, and also mentioned a punctual flow of entry of corporate resources in the Brazilian market.

Even so, the greenback was on course to end the week with an accumulated gain of more than 2%, which would mark its biggest weekly appreciation since the end of December.

Part of these gains was triggered by a chorus of criticism of the Central Bank by President Luiz Inácio Lula da Silva and allies, who complain about the high level of the Selic rate, currently at 13.75%, and the BC’s independence.

On the Stock Exchange, the market should react to Bradesco’s results for the fourth quarter of 2022, released on Thursday night (09).

The bank announced that it made an extraordinary provision of R$4.9 billion to cover its total exposure to Americanas, which filed for bankruptcy last month.

The measure had a strong impact on the bank’s result in the fourth quarter, with recurring profit of BRL 1.595 billion, well below the average projection of analysts consulted by Refinitiv, of BRL 4.4 billion. In comparison with the same period of 2021, profit fell by 75.9%.

The Stock Exchange closed down and the dollar up, reaching R$5.27 this Thursday (9), after news that the government intends to bring forward discussions on the inflation target.

The Ibovespa closed down 1.77% to 108,008 points. The spot commercial dollar rose 1.44% to R$5.2700 on sale. The American currency has already accumulated an increase of almost 4% against the real in February, while the Stock Exchange fell almost 5% in the month.

Interest rates with shorter maturities fell, after the release of January inflation, which was lower than expected. Contracts maturing in 2024 dropped from 13.55% at the close of this Wednesday (8) to 13.44% per annum. For 2025, the rate rose from 12.83% to 12.89%. For 2027, the rate increased from 12.92% to 13.14%.

According to the Bloomberg agency, the economic team appointed by President Luiz Inácio Lula da Silva (PT) considers that the revision of the inflation targets would reduce tensions with the current Central Bank board.

Normally, the CMN (National Monetary Council) discusses these targets in June. But the deliberation could be brought forward to review the target of 3.25% per year for 2023, and 3% per year for 2024 and 2025.

According to sources heard by Bloomberg, the president of the Central Bank, Roberto Campos Neto, would be in favor of changing the targets.

The Minister of Institutional Relations, Alexandre Padilha (PT), said this Thursday (9) that he is unaware of a government debate on changing the inflation target.

This Thursday, the IPCA (Extended Consumer Price Index) for January was released, up 0.53% compared to December, and 5.77% in 12 months. The greatest pressure came from the Food and Beverages category, with an advance of 0.59%.

This Thursday, Santander Brasil revised upwards its projections for inflation and interest rate levels until 2025, drawing attention to uncertainties related to the approval of macroeconomic reforms and risks to the stabilization of the public debt.

The IPCA should end 2023 with an increase of 5.9%, estimates Santander, against 5.4% estimated before. For next year, the inflation forecast rose to 3.7%, compared to 3.5%.

With expectations of higher inflation, Santander now sees the Selic rate at 13.00% at the end of 2023, against 12% forecast in the previous scenario. The rate is currently at 13.75%.

Among the shares, highlight for the preferred Gerdau and Metalúrgica Gerdau, which fell almost 8% shortly after 17:30. Banks JP Morgan and Goldman Sachs downgraded their ratings for the shares from Buy to Neutral.

In the case of Gerdau, the target price of preferred shares dropped to R$32.50, in the case of JP Morgan, and to R$31.00, in the case of Goldman Sachs. This Thursday, the action operates at around R$ 29.25.

Bradesco’s preferred and common shares fell by around 2.30%, shortly before the release of the results for the fourth quarter of 2022, which will be held after the close of the Stock Exchange this Thursday.

Another highlight was Marisa’s common stock, which fell more than 22% this Thursday, and closed at R$0.82, after the resignation of the CEO amid a debt of R$600 million.

Americanas common stock also closed below R$ 1.00, after falling almost 7.5%. The CVM (Securities and Exchange Commission) announced this Wednesday (8) the opening of four new processes to investigate the crisis in Americanas, which filed for bankruptcy after the discovery of “accounting inconsistencies” in its balance sheet.

Stock exchanges in New York also fell shortly before the close, with the market pointing out that interest rates should remain high in the United States for longer than initially expected. Among the companies, highlight is Disney, which announced the dismissal of 7,000 employees and a cut of US$ 5.5 billion in expenses.

The Dow Jones Industrial Average closed down 0.73%, the S&P 500 fell 0.88%%, and the Nasdaq ended the day down 1.02%.

With Reuters