Dollar has 3rd session of decline with new day of adjustments and favorable exterior By Reuters

By Fabricio de Castro

SÃO PAULO (Reuters) – The dollar saw its third consecutive session of decline against the real this Tuesday, in another day of price adjustments after the spike in previous weeks, in a movement favored by the decline in the US currency abroad.

The dollar in cash closed the day at 5.1285 reais 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%.

At 5:11 pm, on B3 (BVMF:) the first maturity contract fell 0.84%, to 5.1320 reais on sale.

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 5.1903 reais (+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 U.S. Manufacturing Purchasing Managers’ Index, 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 has entered contraction territory, with the preliminary PMI falling from 51.9 to 49.9. It already fell from 51.7 to 50.9 in April.

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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. “As market prices have stretched too much, we see relief.”

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

The domestic news did not have a negative impact on the markets this Tuesday. The real increase of 7.22% in March compared to the same month of the previous year, to 190.611 billion reais, 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.

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“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.

At the end of the afternoon, the dollar continued to fall firmly against other currencies abroad.

At 5:12 pm, the — which measures the performance of the US currency against a basket of six currencies — fell 0.40%, to 105.690.