Is it time to buy a dollar to travel? experts answer

The dollar is at its lowest in five months and this low moment coincides with the lifting of restrictions on tourism in several countries due to the advance of vaccination against Covid-19. Given this, it is likely that some people are wondering if the time has come to buy the American currency to travel. The answer depends on travel plans and the risk the buyer is willing to take.

Last Wednesday (9), the commercial dollar closed the day at R$ 5.226, the lowest price since September 13 of last year (R$ 5.223). On Friday (11), before closing the trading session at R$ 5.24, the currency had fallen to R$ 5.18 and only did not maintain the low because the market was frightened by news that US authorities warned of a imminent Russian invasion of Ukraine.

Countless variables can influence the exchange rate in a span of a few hours or even a few minutes. The current crisis in Europe is just one of them. This makes it virtually impossible to know when is the best time to buy coins.

“The most prepared professionals in the market work to set how much the dollar will be at the end of the year, even so, they make mistakes”, says Flávio Oliveira, a partner at Zahl Investimentos.

It is unpredictability that leads to a basic recipe for buying currency for an international trip: looking for the average price. The rule is to buy equal amounts of dollars at regular intervals in the period between the start of planning and shipment.

Weekly, biweekly or monthly shopping intervals are choices that will depend more on the time availability and organization of each buyer. The most important thing is to buy equal amounts and respect the established intervals.

“Buy regularly, in equal parts, choosing the fixed day [do mês ou da semana]” guides Oliveira. “It’s what all people should do”, he says.

The average price rule applies to short, medium and long term planning. Exceptions are only for urgent trips or trips that are already very close.

“If the trip is in a month, you can buy everything now, because you can’t know which day will be best”, comments Natália Monaco, equity strategist at Veedha Investimentos.

At a time of some relief in the exchange rate, however, there is a great temptation to disregard the guidelines of experts. In this case, for those who literally want to place a bet for a trip planned for the short term, there are two reasons to believe that this low may be temporary and therefore favorable to the purchase.

The first is that this is a year of electoral dispute for the Presidency of the Republic. The period tends to push the dollar higher as the campaign period approaches.

Attentive to measures by the current government and proposals from the main candidates that may be considered risky for the balance of public accounts, investors can exchange investments in the domestic economy for assets abroad. A consistent outflow of capital would make the dollar scarce and even more expensive.

The second indicator of a just temporary decline in the exchange rate is the global context. The dollar is falling due to the voluminous entry of foreigners into the Brazilian financial market. They contributed BRL 32.5 billion to the country’s stock market in January, according to a report by B3, the Brazilian Stock Exchange. The month was the most positive for the flow of foreign capital on the Brazilian stock exchange since November 2020.

But it is possible that international investors, who represent 53% of the capital invested in the stock exchange, are only looking for momentary gains in emerging countries while the main world stock exchanges are going through a period of low.

Major global markets delivered extraordinary profits in 2021, especially the results in the United States. The S&P 500 index, a benchmark for the New York stock market, rose 28% last year.

Virtually zero interest and injections of money into the market through the purchase of assets were the yeast used by the Fed (Federal Reserve, the American central bank) to make this cake grow so big.

In 2022 the situation is different. The S&P 500 dropped 7.3% from the beginning of the year until last Friday (11). Nasdaq, an exchange that concentrates technology companies and which have the greatest potential for growth, has already sunk 9.3%.

The declines in the US market occur due to the expectation that the Fed will be forced to promote a strong monetary tightening to control the country’s highest inflation in 40 years. The adjustment is scheduled to begin in March, but the monetary authority has not been clear about how much and at what speed it will raise interest rates.

While waiting for a definition on the size of the adjustment, investors liquidate assets made more expensive by the recent rises in the main exchanges and look for devalued and promising papers in emerging markets.

Brazil stands out among the options due to the favorable moment for its higher value companies, mainly in the basic materials sector. Strengths of Brazilian commodities, oil and iron ore are on the rise.​

Also attractive to foreigners, the solid Brazilian banking sector is assessed as promising due to the possibility of increasing profits amid the rise in Brazil’s basic interest rate, which is at 10.75% year-on-year.

“We see foreigners enter [na Bolsa], rotating between stocks from growth to value. Outside tech stocks are falling sharply and inside here, value companies like commodities and banks are rallying in value driven by foreigners,” says Jennie Li, equity strategist at XP.

The main risk of capital outflows from Brazil is the effective start of interest rate hikes in the United States, especially if this increase occurs faster and more widely than expected. This would increase the attractiveness of US Treasuries, considered the safest investments in the world.

“Part of the capital may be waiting here until American interest rates rise. In the meantime, we benefit here,” says Natália Monaco, from Veedha.