Dollar sees slight rise before interest rate decision – 5/2/2023 – Market

The dollar had a slight rise in the first trades this Tuesday (2), around R$ 5.00 as investors awaited the conclusions of the monetary policy meetings of the Central Bank of Brazil and the Federal Reserve.

At 9:07 am (Brasília time), the spot dollar advanced 0.23%, to R$ 5.0005 in the sale. In the last session, on Friday (28), the spot dollar closed the day quoted at R$ 4.989 on sale, up 0.18%.

In Brazil, the expectation is that the Selic rate will be maintained at 13.75% per year, even with President Luiz Inácio Lula da Silva’s (PT) offensive against the current interest rate in the country. On Monday (1st), during the Labor Day act of the trade union centrals, Lula stated that the interest rate in Brazil does not control inflation, but unemployment.

Last week, BC president Roberto Campos Neto said that the basic interest rate is an instrument that needs to be conducted with credibility to create favorable conditions for the Brazilian economy to grow.

“What matters in the economy is not the Selic, it is what we call financial conditions, which is the total liquidity I have in the economy. The Selic is an instrument that, to generate liquidity conditions, has to be conducted with credibility,” said Campos Neto

In the US, an increase of 0.25 percentage points in interest rates is expected, especially after the announcement, last week, that the country’s inflation was 4.2% in March, proving to be persistent and still good. above the Fed’s 2% target.

The expectation, however, is that the probable increase this week is the last of the current monetary tightening promoted by the American central bank. The fear is that the Fed will cause a recession with its aggressive policy of raising interest rates.

The US market is also following the bankruptcy of First Republic Bank, after JPMorgan bought the bank’s operations on Monday (1st) in a federal auction. As part of the deal, which will allow for the orderly bankruptcy of the First Republic, JPMorgan will make a $10.6 billion payment to the FDIC (US Deposit Control Agency).

Following the announcement of the settlement, the US Treasury Department said it was encouraged that the First Republic Bank crisis was resolved at the lowest cost to its deposit insurance fund, and believes that the US banking system remains solid and resilient.

First Republic came under intense pressure after it disclosed last week that it had experienced more than $100 billion in outflows in the first quarter and was exploring options. Last Friday (28), news about a possible federal intervention to solve the problem had already dropped even more the bank’s shares, which lost more than 90% of their value in the year.

The Brazilian Stock Exchange, however, closed higher on Friday, with the release of economic activity and unemployment indicators in Brazil. The dollar also rose after US inflation data.

The Ibovespa rose 1.47%, to 104,431 points, accumulating a weekly high of 0.06%. In the month, the high was 2.8%.

The dollar rose by 0.18% to R$4.988, closing for the second consecutive day at less than R$5.00.

Futures markets also rose. Interest contracts maturing in January 2025 rose from 11.90% to 12.04%. For 2027, they went from 11.67% to 11.79%, and those for 2029 went from 12.00% to 12.10%.