The dollar closed up 1.01%, quoted at R$5.14. The currency was driven by the fear that the fiscal sector would get out of control, a thesis that gained strength after the Monetary Policy Committee (Copom) cut, yesterday, the Selic (basic interest rate) by 0.25 percentage points (pp), which, for the market, shows that the Central Bank (BC) is concerned about the domestic fiscal framework.
The Brazilian currency contradicted other emerging currencies, which appreciated in relation to the dollar, influenced by the relief in rates on Treasuries, US Treasury bonds.
“We are seeing a very volatile, stressed foreign exchange market. The main justification is internal, with communication being much tougher than expected, with the market understanding that the government will have influence over the next BC presidency”, says Potenza Capital analyst, Bruno Komura.
Current scenario and speculation about the Central Bank
The increase in the dollar is linked to the increase in the risk premium, due to the possibility of a more tolerant stance by the Central Bank towards inflation from 2025, when the current president, Roberto Campos Neto, will be replaced.
The Copom reduced the Selic rate by 0.25 percentage points, to 10.50% per year, but there was uneasiness due to the prospect of a change in the collegiate’s profile suggested by the voting score.
Analysis of consultancies and economists
Consultancies such as Capital Economics state that the real is expected to suffer in the coming quarters, despite the slowdown in the pace of Selic rate cuts. There is speculation that the number of more dovish Copom members will likely increase next year, which could lead to a downward trajectory in interest rates.
Economists such as André Galhardo, from Remessa Online, consider the market reaction “disproportionate” and believe that the dollar should continue to operate in a corridor between R$5.05 and R$5.15.
*With information from the CMA Agency
