The anecdote that the exercise of predicting the dollar exchange rate was invented to humiliate economists has become a cliché, so often repeated. But, all things considered, it would take many and intense upheavals — the resurgence of old wars or the installation of new wars, for example — in the external and internal economic environment, for the dollar exchange rate, throughout 2024, to leave the narrow interval between R$4.70 and R$5. “More like R$5 than R$4.70”, notes the experienced José Francisco Lima Gonçalves, chief economist at Banco Fator.
Analysts who follow the foreign exchange market are divided on the real reasons for the BC’s intervention in the foreign exchange market. The BC justified the auction of US$ 1 billion, fully absorbed by the market, as a measure to neutralize dollar purchasing pressures with the maturity of a public bond, with exchange rate variation, the NTN-A3, launched in 1997.
There are doubts in the market about the volume of dollars that will have to be purchased to liquidate positions in this NTN-A, which expires on Monday, April 15th. It is estimated that something above US$3.5 billion will have to be settled, and, therefore, there are also doubts as to whether the BC’s offer of a third of that amount will be sufficient to avoid further volatility in prices.
Not everyone, however, believes that there is no fear, at the Central Bank, that the volatility in dollar prices is here to stay in 2024, linked to other factors, not just the liquidation of an old public bond. Therefore, there are suspicions that the auction announced by surprise would be a test for interventions that might be necessary later on.
Arguments can be gathered to support this suspicion. The list begins with expectations about a slowdown or reduction in the rate of reference interest rate cuts in the United States, given the persistent signs of warming in the economy, and, above all, in the job market. It is these expectations that are giving strength to the dollar, around the world, in recent days.
On the internal plane, the volatility that could affect dollar quotations would reflect uncertainties regarding fiscal policy definitions — changing the target of zeroing the primary deficit in public accounts or promoting spending contingencies that guarantee fiscal balance, as the market finds preferable. The picture would be completed based on the natural increase in uncertainty as the change in the presidency of the BC approaches, which will take place at the end of the year.
