Dollar rises with search for protection before Copom and advances abroad

Investors’ search for protection before the Copom’s decision on interest rates and the rise of the dollar abroad made the US currency close on Wednesday on a high in Brazil, again close to 5.10 reais.

The dollar in cash closed the day at 5.0914 reais on sale, up 0.46%. In May, however, the currency accumulated a drop of 1.95%.

At 5:10 pm, on B3, the first maturity dollar futures contract rose 0.29%, to 5.1010 reais on sale.

The expectation surrounding the decision by the Central Bank’s Monetary Policy Committee (Copom), scheduled for early evening, permeated business throughout the day.

In the DIs (Interbank Deposits) market, most investors took a position that the collegiate will cut the Selic by just 25 basis points, but bets on a 50 basis point cut were not negligible. Currently the Selic is at 10.75% per year.

Amid doubts, some investors preferred to increase long positions in the dollar (in order to increase prices) before the Copom decision.

“We have the protection factor here before the Copom. If the Central Bank cuts the Selic by 50 basis points, this ends up supporting the dollar, but if the cut is 25 basis points the upward pressure eases a little”, commented during the afternoon Jefferson Rugik, director of Correparti Corretora. “Many people prefer the protection of the dollar to wait (for the decision).”

In addition to expectations before the Copom, the dollar gained support from abroad, where the US currency had firm gains against strong currencies and in relation to most currencies from commodity and emerging exporters. Treasury yields also rose.

“Today (Wednesday) is a strong dollar day, with the DXY (dollar index) rising. It is becoming a consensus (in the market) that the euro should perform worse than the dollar, because the ECB (European Central Bank) will cut This is also causing the US to take flow from emerging markets”, said Lais Costa, analyst at Empiricus Research.

In this scenario, the spot dollar varied between the minimum price of 5.0776 reais (+0.19%) at 9:01 am — shortly after opening — and the maximum of 5.1092 reais (+0.81%) at 10:19 am.

Abroad, the US currency remained high in the late afternoon against a basket of strong currencies.

At 5:09 pm, the dollar index — which measures the performance of the US currency against a basket of six currencies — rose 0.12%, to 105.550.

In the morning, the BC sold all 12,000 traditional currency swap contracts offered to roll over July maturities.

In the afternoon, the BC reported that Brazil recorded a total positive foreign exchange flow of 1.994 billion dollars in April, with net outflows of 10.997 billion dollars through the financial channel and inflows of 12.991 billion dollars through the commercial channel.