Dollar falls after Credit Suisse gets support; see quotation – 03/16/2023 – Market
The dollar opens in decline this Thursday (16), with investors still attentive to the crisis in the banking sector after the collapse of SVB (Silicon Valley Bank) in the United States and the problems faced by Credit Suisse in Europe.
In this context, the decision of the ECB (European Central Bank) on interest rates gains special attention from the market. In the United States, the highlight is data on unemployment insurance claims, which gain relevance a week before the Fed (Federal Reserve, the US central bank) meeting on interest rates in the country.
At 9:11 am (Brasília time), the spot dollar retreated 0.36%, to R$ 5.2753 on sale. On B3, the dollar futures contract for the first month fell 0.25% to R$5.2915.
The day before, the spot US currency closed the day quoted at R$5.2944 on sale, up 0.70%.
Even with the impact of the crisis faced by Credit Suisse in the global markets, the Brazilian Stock Exchange took a breather on Wednesday (16) afternoon, and closed in a more moderate fall than the pace seen in the morning.
The index reached a level of 100,000 points, the worst recorded since July 2022. But the news that the new fiscal framework has already been delivered to the Planalto left local investors less pessimistic.
The Ibovespa closed down by 0.25%, at 102,675 points. At the low of the day, the index hit 100,692 points. The spot commercial dollar rose 0.72% to R$5.294. The FX is more influenced by the news involving Credit Suisse, and follows the global trend. But at the maximum of the day, the currency reached R$ 5.32.
Interest rates showed moderate decreases, with the perception that monetary policies in the United States and Europe may change, if the banking crisis continues and starts to have effects on economic activity.
For contracts maturing in January 2024, the rate dropped from 13.05% at the close of this Tuesday (14) to 12.97% per annum. For January 2025, interest rates dropped from 12.22% to 12.06%. For January 2027, the rate dropped from 12.58% to 12.51%.
The Minister of Finance, Fernando Haddad (PT), said this Wednesday (15) that the proposal for the new fiscal rule, which will replace the spending ceiling, has already been delivered to the Planalto.
Later, Lula stated that he has not yet seen the fiscal framework proposal prepared by the economic team, but that he should talk this Thursday (16th) about the subject with Haddad, and wants to have the project defined before the trip to China, scheduled for the next 24th.
“I have not seen yet [o arcabouço]. I had a first conversation with Haddad, he got ready. As soon as it’s ready, I’ll see,” said Lula after having lunch with the Navy’s high command. “As soon as I see you, you’ll see. When it is approved, you will see, journalists will be the second people to know about the framework. It must be before the trip, because Haddad will be traveling with me.”
The president’s endorsement is the last step before the proposal goes to the National Congress.
A Sheetmembers of the government involved in the debate stated that the framework will allow reaching the goal of zeroing the primary deficit as early as 2024.
Abroad, the climate in the markets is still one of caution. The main European stock indices closed with sharp declines. The Euro Stoxx 600 was down 2.92%. The London Stock Exchange’s FTSE 100 index closed down 3.83. Shares in Credit Suisse, traded on the Zurich Stock Exchange, fell nearly 25% on Wednesday.
The Swiss bank’s biggest investor said it could not provide further financial assistance due to regulatory concerns. “We can’t because we would go above 10%. It’s a regulatory issue,” said Saudi National Bank chairman Ammar Al Khudairy.
The Saudi bank acquired a slice of almost 10% last year after participating in the capital increase of Credit Suisse and committed itself to investing up to 1.5 billion Swiss francs (US$ 1.5 billion, R$ 7.8 billion ) at the institution.
Credit Suisse said in the 2022 balance sheet that it identified distortions in financial statements and that it has not yet contained the departure of customers from its base.
“As of December 31, 2022, the group’s internal control over financial reporting was not effective and, for the same reasons, management has reassessed and reached the same conclusion as of December 31, 2021,” the Swiss bank said in a statement. released this Tuesday (14).
In a conference held this Wednesday, Credit Suisse executives tried to calm the market. According to the Bloomberg agency, the chairman of the board of directors of the bank, Axel Lehmann, ruled out possible help from the Swiss government.
He also rejected any comparison with the problems faced by average banks in the United States.
However, the Swiss central bank said on Wednesday that it would provide financial support to Credit Suisse if necessary, and that the institution meets the requirements to be considered systematically important.
Analysts project that the situation could still get worse. In a report, Guide Investimentos points out that other important European banks, such as Deutsche Bank and UBS, have their risk rates, equivalent to country risk for companies, on the rise in the markets.
In the US market, economic data reinforce the perspective that the Fed (Federal Reserve, the US central bank) can maintain the pace of 0.25 percentage points of high interest rates at the meeting to be held next week.
US retail sales fell 0.4% in February, from 3.2% growth in January, while economists polled by Reuters had expected a 0.3% contraction.
A separate report showed that US producer prices unexpectedly fell in February and that the January price increase was not as large as initially thought, offering some positive signs in the fight against inflation.
The data comes at a time when the collapse of SVB Financial and Signature Bank had already fueled fears about the health of other banks, fueling hopes that the Fed would avoid sharp rate hikes at its next meeting to ensure financial stability.
Traders now see equal odds of a 25-point rise and hold at the Fed’s March meeting.
In New York, stock indices followed the trend of improvement in the afternoon. The Dow closed down 0.87% and the S&P 500 fell 0.70%. The Nasdaq index managed to reverse the trend seen throughout the day, and ended up 0.05%.
In Brazil, however, the most general view is that it is still too early to implement a change in the trajectory of the Central Bank’s Copom (Monetary Policy Committee), at least in the short term.
In theory, a scenario of a slowdown in the pace of monetary tightening by the Fed and maintenance of high interest rates in Brazil would be positive for the real, as the greater difference in profitability tends to make the Brazilian currency attractive to foreign investors.
However, market professionals explain that, if the Fed really is less aggressive from now on, it would signal that the bank perceives high risks for the global economy, which would probably fuel fears of recession and boost the search for safe assets, such as the dollar.