Dollar ignores Central Bank intervention in exchange rate and rises

After spending 2023 blank, without intervening in the dollar, the Central Bank offered this Tuesday (02), exchange rate swap contracts in an attempt to hold the price of the American currency, which the previous day (01) had closed at R$ 5.054, an increase of 0.87%, with the real leading the loss in value among emerging currencies. All contracts offered by the BC were sold 20 thousand contracts, equivalent to US$ 1 billion, but are still considered insufficient to contain a depreciation of the real. At 4:30 pm the currency advanced 0.11%, to R$5.098.

The BC’s return to the market, after spending 2023 without operating, is justified for two reasons. The first is the growing idea that the FED should postpone the interest rate cut again due to inflation and the resilience of the job market, which strengthens the dollar. “There are risks that a greater appreciation of the American currency could also affect domestic inflation, due to imports, and hinder the steps of the Central Bank, which has already signaled that it needs flexibility to continue cutting the Selic”, comments Yuri Alves, economist at Guide Investments.

Another reason for the BC’s return to intervening in the exchange rate is the maturity on the 15th of NTN-A3, which are public debt securities linked to the dollar. Normally, during maturity periods, the debt is rolled over, with the issuance of new securities. “NTN-A3 is a security that seeks to protect against inflation. Its maturity shows that the market will want more demand for this paper and, consequently, with the issuance, it will also anchor via new dollar swaps”, explains the Guide economist.

In Yuri Alves’ view, this Tuesday’s auction was insufficient to contain the dollar’s upward movement and some signs confirm this. “It was clear that there is still demand for more contracts. If the one billion sold had been what was demanded, the dollar would have retreated and that is not what we saw. There was greater demand,” he comments, adding that longer NTN-Bs have rising rates, signaling uncertainty in the long term. “The BC should return to the market before the NTN-A3 expires, perhaps next week, when the CPI, American inflation, comes out, which could further reinforce the strength of the dollar and high interest rates in the United States.”

Legacy Capital’s CIO, Felipe Guerra, also sees little room for appreciation of the real against the dollar. During his participation in the panel at the Brazil Investment Forum, an event promoted by Bradesco BBI, he stated that “he was never optimistic about the real, because Brazil is cutting interest rates and the world is holding back. The interest rate differential is at a minimum if you exclude the pandemic period.” The Legacy executive added: “you gain nothing by taking the risk of being real in our vision.”