Exchange rate: Dollar closes down, benefiting from slowdown in activity in the United States

The commercial dollar closed the day down 0.74%, falling for the third session in a row, quoted at R$5.13. The currency followed its peers and benefited from economic activity in the United States — the service and industry PMIs — in slowdown, which could open up space for an interest rate cut there.

Dollar movement

Apart from a limited upward movement in the first hour of trading, before the release of American indicators, the currency fell for the remainder of the session. With losses deepening throughout the afternoon, in line with the exterior, the dollar registered a minimum at R$5.1195.

At the end of the day, the currency fell 0.74%, to R$5.13 — the lowest closing value in ten days.

In the last three trading sessions, the currency accumulated a drop of 2.28%. In April, however, the dollar still appreciated 2.29% against the real.

DXY Performance

Abroad, the DXY index — which measures the performance of the American currency in relation to six strong currencies, especially the euro — returned to working below the 106,000 point line, with a minimum of 105,614 points.

Among the main emerging currencies and those of commodity exporting countries, the biggest gains came from the Mexican peso and the real. The recovery was already expected, given that both currencies still accumulate the worst losses among emerging markets in the month.

Expert analysis

“The upward movement of the dollar was very strong last week and is gradually being reversed. The dollar is also making a comeback against other currencies. And here exporters are bringing resources to take advantage of the higher exchange rate”, said the chief economist at Western Asset, Adauto Lima, in an interview with Estadão.

“The BC was right not to intervene. The fundamentals changed and it made no sense to act to mask this process”, he added.

US economic data

In the US, the composite PMI released by S&P Global fell from 52.1 in March to 50.9 in April, the lowest level in four months. Analysts had expected a rise to 52.5. The Industrial PMI fell from 51.9 to 49.9. .

The CME Group tool showed an increase in the chances of a 50 basis point interest rate reduction by the Fed this year, moving to slightly above bets on a cut of just 25 basis points.

Tax scenario

At the moment, attention is focused on the efforts of the Minister of Finance, Fernando Haddad, to dismantle the bomb agenda in Congress that could increase spending by R$70 billion. After today’s meeting with the president of the Chamber, Arthur Lira (PP-AL), Haddad said that there was an agreement to vote on the bill that reformulates the Emergency Program for the Resumption of the Events Sector (Perse), with a fixed cost of R $15 billion by 2026.

Citi

For Citi, the increase in local fiscal risk helps explain the recent depreciation of the real and should lead the dollar to fluctuate around R$5.10 at the end of 2024. Previously, the bank expected the exchange rate to remain stable below R$5, given the strength of external accounts.

“The depreciation of the real, combined with an increase in the CDS [Credit Default Swap] of Brazil above the emerging market average, indicates that the prices of domestic assets are not reacting only to external factors”, says the bank.

With information from the CMA Agency