Dollar drops to R$4.81 after S&P raises Brazil outlook to ‘positive’; stock market goes up

Investments

Ibovespa exceeds 119 thousand points for the first time in the year, in the best closing since October

Sao Paulo-SP) – The dollar closed at R$ 4.814 and again reached its lowest level of the year this Wednesday (14), deepening losses after the risk rating agency S&P raised the outlook for Brazil’s credit rating from ‘stable’ to ‘ positive’.

In addition, the Fed (Federal Reserve, the US central bank) announced on Wednesday a pause in the escalation of interest rates in the United States, which also weighed against the US currency throughout the day.

The Brazilian Stock Exchange remained positive throughout the trading session and closed up 1.99%, surpassing 119,000 points for the first time in the year. The Ibovespa also accelerated gains after the news of elevation by S&P.

The dollar and the stock exchange were already being impacted by the improvement in expectations about the Brazilian economy in recent weeks, especially about the country’s GDP and inflation, which positively surprised the market.

In this scenario, S&P raised the rating for Brazil’s credit rating to ‘positive’ at the end of this Wednesday afternoon, stating that signs of greater certainty about fiscal and monetary policies may benefit the country’s economic growth expectations.

The agency also said that, despite the high fiscal deficits, the continued growth of GDP (Gross Domestic Product) added to the proposed fiscal framework may result in a smaller increase in government debt than initially expected.

The improvement in Brazil’s risk rating made the Ibovespa accelerate its rise and renew its maximum level of the day in the last half hour of trading. The index closed at its highest level since October 2022, at 119,068 points.

In addition, the Fed carried out this Wednesday, in a unanimous decision, the first pause in American interest rates since March 2022, something that was already expected by the market. In their projections, however, bank officials predicted an additional rise in interest rates in the country, which are at the highest levels in 16 years, still in 2023.

In a statement, the Federal Open Market Committee (FOMC), the body that makes decisions on interest rates in the US, said that the pause in interest rates will allow Fed officials to assess the country’s economic information and the effects of the monetary policy promoted by the institution.

Fed Chair Jerome Powell said at a news conference after the decision that nearly all committee members thought it was likely that additional rate hikes this year would be appropriate to control inflation.

The break in interest rates promoted this Wednesday has the power to further depreciate the dollar, which has been renewing its minimum levels in recent weeks.

This is because a scenario of high interest rates tends to appreciate the US currency, as it increases the return on US fixed income and, consequently, attracts funds from foreign investors to the country. In reverse logic, a lower interest rate differential tends to depreciate the dollar.

*With information from Folha de S.Paulo

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