Dollar falls and the stock market rises in new positive session for Brazil

The stock market and the dollar once again reflected the favorable moment for the Brazilian market in the early afternoon of this Tuesday (1st), while investors sought to grope for a business environment with higher interest rates in Brazil and the United States.

After reaching the highest monthly high in more than a year the day before, the Ibovespa rose 0.73%, to 112,960 points, at 12:23 pm this Tuesday. The dollar fell 0.58% to R$5.27​60. The American currency ended January with the lowest price in four months.

Doubts about how much and at what speed interest rates in the United States will rise until inflation in the country is under control are moving markets. While waiting for stability there, foreigners are looking for cheap Brazilian stocks, in addition to fixed income investments with generous returns due to the rising domestic interest rate. This movement increases the supply of dollars in the country and largely explains the appreciation of the real.

Analysts estimate that the dollar’s fall may gain strength this Wednesday (2), when the Central Bank of Brazil should increase the Selic rate by 1.5 percentage points, to 10.75% per year.

As for US interest rates, there is only consensus that monetary tightening should begin in March. Initially, there were expectations of three rate hikes over the course of 2022. Now, analysts speak of four or five adjustments.

American interest rates have been practically zero since the beginning of the pandemic, a measure adopted by the Fed (Federal Reserve, the central bank of the United States) to avoid a sudden cooling of the economy amid measures to restrict circulation to contain Covid-19.

Patrick Harker, chairman of the Philadelphia Fed, said Tuesday that four increases may be appropriate. “Right now, I think four 25 basis point increases this year are appropriate,” Harker said in an interview with Bloomberg. He pointed out, however, that uncontrolled inflation may require more stringent measures.

American stock markets had a positive daily close on Monday, although the monthly result was negative. The S&P 500, the main US stock index, ended January down 5.3%, its worst monthly performance since March 2020, said Lucas Collazo, an investment specialist at Rico.

At the opening of this Tuesday’s session, the indices were falling. Dow Jones, S&P 500 and Nasdaq were all down 0.175%, 0.67% and 0.60%, respectively.

For Nicolas Borsoi, chief economist at Nova Futura, the accommodation of interest rates and the positive results of the fourth quarter of most companies listed in New York can help the recovery of stock markets around the world.

For this Tuesday, the release of results from giants such as Alphabet, owner of Google, and Exxon Mobil, may move the market, highlighted Ativa Investimentos, in a note.

Paloma Brum, an analyst at Toro Investimentos, says, however, that the rise in US interest rates could still be a hindrance to the performance of the real and other emerging market currencies “with an outflow of capital towards [aos títulos soberanos norte-americanos], considered the safest in the world, [que estariam] paying more”.

A round of talks between the Russians and the Americans on Tuesday could take – or increase – some of the pressure on the price of oil. Russia, one of the major global producers, is deploying troops to, in the opinion of Western powers, prepare an invasion of Ukraine’s territories.

The barrel of Brent oil retreated R$ 3.54, to US$ 87.98 (R$ 471.29). The market is also awaiting a definition from OPEC (the organization of exporting countries) on whether or not to increase production of the commodity.

with Reuters