Dollar sees little change on Fed expectations, Russia sanctions

The dollar had little change against the real on Wednesday morning (6), after having paused a sequence of devaluation the day before, with investors awaiting the release of the minutes of the last monetary policy meeting of the central bank of the United States and the announcement of new sanctions against Russia.

At 9:11 am, the spot dollar advanced 0.14%, at R$ 4.6647 on sale. On the Brazilian Stock Exchange at the same time, the first-maturity dollar futures contract rose 0.16% to R$4.6930.

The day before, the spot currency rose 1.10%, to R$4.6583 on sale, the highest daily percentage increase since last March 14 (+1.31%).

The Central Bank will start this Wednesday the full rollover of US$ 14.8 billion (R$ 68.6 billion) in traditional foreign exchange swap contracts that expire on June 1st, the autarchy said on Tuesday night (5) .

​Markets are trading attentive to the release of the minutes of the last meeting of the Fed (Federal Reserve, the central bank of the United States). Investors hope to find clues in the document about the monetary authority’s next steps to try to curb the country’s highest inflation in four decades.

Faced with the prolonging of the war in Ukraine and possible new sanctions on Russia over accusations of crimes against civilians committed in the Ukrainian city of Butcha, concerns are growing about the need for a higher-than-expected interest rate hike. The restriction on Russian raw materials for energy production could further accelerate the world price hike.

Russia is one of the main exporters of oil and gas, in addition to having an important production of coal. The two warring countries are also major grain suppliers.

Before the opening of the stock markets in Brazil and the United States, the futures indices of both countries indicated a bearish day. In Europe, the London, Paris and Frankfurt Stock Exchanges fell by 0.37%, 1.84% and 1.79%, respectively.

“A ‘hawkish’ Fed means that growth will be inhibited because high interest rates make projects unfeasible,” said Davi Lelis, a partner at Valor Investimentos.

Hawkish is a term used in the financial market to describe a restrictive monetary policy on the supply of credit to fight inflation. In the opposite situation, when measures to expand economic growth are adopted, the market says that the monetary authority is “dovish”.

In March, the Fed raised the country’s benchmark interest rates for the first time since 2018. Now, in addition to continuing to raise the credit rate, the authority must also begin to reduce its bond portfolio, which accumulates about $9. trillion (R$ 41 trillion).

During the pandemic, one of the Fed’s strategies to mitigate the economic cooling was to inject liquidity into the market through the monthly purchase of about US$ 120 billion (R$ 554 billion) in real estate and Treasury bonds. That program ended this year. Now, to reduce its balance sheet, analysts estimate that the bank will let these bonds mature.

The price of Brent oil, world reference, rose 0.71% this morning. The price of a barrel was US$ 107.40 (R$ 498.27).

Variations in the price of oil and uncertainties about the command of Petrobras also influence the Brazilian stock exchange this week, says Lelis.

The threat of a strike by federal employees and the withdrawal of businessman Adriano Pires from taking over the presidency of Petrobras are among the main domestic noises that could affect the Ibovespa this Wednesday.