Dollar has its 3rd day of decline, with a favorable outlook; Ibovespa falls, driven by Vale

The spot dollar registered this Tuesday, the 23rd, the third consecutive session of decline against the real, in another day of price adjustments after the spike in previous weeks, in a movement favored by the drop in the US currency abroad.

The spot dollar closed the day at R$5.1285 on sale, down 0.80%. In three business days, the currency accumulated a drop of 2.33%. In April, the US currency still accumulated an increase of 2.25%. See the dollar exchange rate today.

Meanwhile, in the stock market, Ibovespa closed with a discreet retreat, but far from the day’s lows, with Itaú Unibanco (up 1.49%) among the main positive supports, while Vale (down 0.87%) and steel mills exerted negative pressure, with Usiminas dropping around 14%, also affected by the company’s short-term prospects.

The Brazilian stock market reference index, Ibovespa fell 0.34%, to 125,148.07 points. At the day’s high, it reached 125,825.7 points. At its lowest point in the morning, it scored 124,310.1 points. The financial volume totaled R$21.2 billion.

The Brazilian trading session also benefited from the positive bias in North American stock markets and discreet variations in the yields on United States Treasury bonds, following data showing a slowdown in the growth of business activity in the largest economy in the world.

Rises and falls of the dollar

At the beginning of the session, the dollar fluctuated in positive territory, recovering part of its value against the real after having weakened in the previous two sessions. The movement was in line with the advance of the US currency abroad. At the session’s highest price, at 10:12 am, the dollar in cash reached R$5.1903 (+0.40%).

The release of relatively weak figures for the North American economy, however, put the dollar back into negative territory.

S&P Global said its Composite Purchasing Managers’ Index (PMI) of U.S. production, which tracks the manufacturing and services sectors, fell from 52.1 in March to 50.9 in April. A reading above 50 indicates expansion in the private sector.

The manufacturing sector entered contraction territory, with the preliminary PMI falling from 51.9 to 49.9. The services index fell from 51.7 to 50.9 in April.

After the numbers, released at 10:45 am, Treasury yields lost strength, as did the dollar against most other currencies.

“The global market had already priced in the heated North American economy, greatly extending the worsening of the scenario, buying the dollar. As it has stretched a lot, for (the price) to continue rising, surprises have to appear on a recurring basis”, commented Nicolas Borsoi, chief economist at Nova Futura Investimentos.

“But today the PMIs were weaker than expected,” added Borsoi, justifying the continuation of the downward correction movement of the dollar in relation to the real. “As market prices have stretched too much, we see relief.”

This caused the spot dollar to record a minimum price of R$5.1185 (-0.99%) at 2:48 pm, while abroad the US currency also sustained firm losses against a basket of strong currencies.

Indoor scenario

The domestic news did not have a negative impact on the markets this Tuesday. Federal revenue had a real increase of 7.22% in March compared to the same month of the previous year, to R$ 190.611 billion, according to the Federal Revenue, marking the best performance in the historical series that began in 1995.

The tax reform regulation text has already been approved by President Luiz Inácio Lula da Silva and is now being prepared for submission to Congress.

“After a tense week surrounding the review of the fiscal target, the local political scenario is also a little calmer with the rapprochement between the government and Congress”, said Diego Costa, head of foreign exchange for the north and northeast at B&T Câmbio, in comment sent to customers.

“The expectation is that the text of the (regulations for) (tax) reform will be delivered tomorrow (Wednesday), which could contribute to reducing investors’ distrust about the government’s commitment to public accounts,” he added.