Economy

Dollar closes week close to R$5 and drop reaches 10% in 2022 with interest attracting foreigners

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High interest rates and the appreciation of the main raw materials produced in Brazil returned to devalue the dollar against the real this Friday (18). In the specific case of commodities, the gains in this segment also drove a new high on the Stock Exchange.

The dollar closed down by 0.39%, at R$ 5.0170. In the course of the day, it came back to R$ 4.99. The American currency fell 0.71% in the accumulated result for the week. In the year, the devaluation reached 10.02%.

In the third consecutive day of gains, the Ibovespa rose 1.98%, to 115,310 points. This pushed the country’s stock market benchmark index to a weekly growth of 3.22%. In the year, the stock market rose 10.01%.

Even with the fluctuations caused by investors’ aversion to risk markets since the beginning of the war in Ukraine, in February, some favorable conditions for attracting foreign resources to Brazil were maintained.

The main one is an advantageous ratio of Brazilian interest rates compared to those offered by other countries, according to Zeller Bernardino, a partner at Valor Investimentos.

This week, the Central Bank of Brazil raised the Selic rate by one percentage point, to 11.75% per year, and signaled further increases. “This makes the premium for investments in Brazilian public bonds offset the risks”, says Bernardino.

Attractive to fixed income, high interest rates traditionally discourage investment in companies and, consequently, tend to devalue shares on the Stock Exchange. But that is not what is happening this year.

In addition to being excessively undervalued last year, the Brazilian stock exchange has one of the main attractions for foreign investors in its large companies in the commodities sector, responsible for 53% of investments in the domestic stock market.

Until last Wednesday (16), the balance of foreign investments in Brazilian stocks was R$ 73.5 billion. It is equivalent to 72% of the total of R$ 102.3 billion of the balance for the entire year of 2021, whose result was the highest in the historical series recorded by B3, the Brazilian Stock Exchange.

Oil and iron ore, two of the main raw materials produced in Brazil, are on the rise. This is the result of a combination of economic warming due to the lifting of circulation restrictions caused by the Covid-19 pandemic and also the possibility of reduced supply due to the war in Ukraine.

In recent days, expectations of economic acceleration in China have grown again due to promises of economic stimulus made by Beijing.

The barrel of Brent oil rose 1.50%, to US$ 108.24 (R$ 545.58). The day before, the appreciation of the raw material was 8.79%.

The growth in Chinese demand expectations also boosted iron ore futures contracts, which rose 2.42% on Friday. The steel production sector in China is the world’s largest consumer of the commodity.

Possibilities for quick gains with major commodity exporters drive the main companies in the sector on the Stock Exchange. Petrobras shares advanced 2.13% and those of Vale, 1.53%.

“The growth of commodity exports is also responsible for reducing our exchange rate, as these companies receive in dollars, which increases the supply of foreign currency in the country”, comments Bernardino.

In the United States, the Dow Jones and Nasdaq indexes rose 0.80% and 2.05% on Friday, respectively.

The S&P 500 index, a benchmark for the US market, rose 1.17%, ending the week with a gain of 6.16%.

Last Wednesday, the Fed (Federal Reserve, the country’s central bank) announced the first increase in its interest rate since 2018. The increase of 0.25 percentage point was expected by analysts. There were also indications of six more highs by the end of the year.

Despite confirming the end of an era of expansionary policy, the Fed’s statement gave some predictability about the monetary authority’s next steps in its strategy to try to curb the country’s highest inflation in 40 years.

Year-to-date, the S&P 500 is still down 6.36%. The drop is basically the result of the correction made by investors since the beginning of the year in view of the expectation of rising interest rates in the country.

The war between Russia and Ukraine, however, has also caused fluctuations in the market.

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