Dollar falls to R$5.058 after the BC’s first intervention since 2022; Stock market rises

The dollar closed practically stable, with a slight drop of 0.02%, sold at R$5.058, influenced by an extraordinary auction by the Central Bank in the foreign exchange market. The American currency accumulated an increase of 0.86% against the real in March.

Ibovespa rose 0.44% and reached 127,548.52 points, recovering part of the losses recorded the day before. Last month, the main index of B3 recoiled 0.71%.

The value of the dollar reported daily by the press, including the UOL, refers to the commercial dollar (learn more by clicking here). For those who are going to travel and need to buy currency at exchange brokers, the reference is the tourist dollar, and the value is much higher.

What happened

BC announced up to US$1 billion in currency swap contracts at the session. The objective, according to the authority, was to meet part of the demand generated by the redemption of around US$3.6 billion in NTN-A3 public bonds, scheduled for April 15. Indexed to the dollar, the NTN-A3 has not been traded by the National Treasury for years, but there are still some institutions on the market that hold the paper in their portfolios.

It was the BC’s first intervention in the exchange rate since the end of 2022. A practice has an effect equivalent to the sale of dollars in the futures market and does not involve the foreign currency reserves of the country. A Today’s operation, however, should not be confused with the daily auctions that have been held by the BC to renegotiate June maturities.

In parallel, the market reflected new data from the USA. Industrial orders rose 1.4% in February, while the number of available jobs remained almost stable — data that helps investors guide their expectations for American interest rates. For now, the market sees a 62% chance that the Fed (Federal Reserve, the US Central Bank) will cut interest rates by 0.25 percentage points in June, according to the FedWatch tool.

Stable interest rates in the US tend to benefit the dollar. This happens because, with interest rates still at a high level, investors redirect resources to the American fixed income market, considered very safe. On the other hand, signs that the Fed will start reducing interest rates soon tend to boost riskier, but more profitable currencies, such as the real.

The BC is using as justification the maturity of debt securities on April 15th… But, in truth, it could have made this intervention at any time between the 2nd and the 15th. It is a fact that the recent devaluation of the real must be worrying the BC, which seeks to contain a more significant upward movement and reduce volatility in the exchange rate.
Leonel Mattos, analyst at StoneX, told Reuters

The lack of confidence in the Stock Exchange is a reflection of the most recent data from the American economy, which reflect heated activity. In my view, the likely maintenance of interest rates [nos EUA] for longer than expected discourages investors from seeking higher returns in other markets, such as the Brazilian Stock Exchange.
Felipe Pohren de Castro, partner at Matriz Capital, told UOL

(With Reuters)