Follow the dollar exchange rate today (20) – 09/20/2023 – Market

The dollar opened falling this Wednesday (20), in a session of total focus on the monetary policy decisions of the Fed (Federal Reserve, the American central bank) and, after the markets closed, the Central Bank of Brazil.

At 9:43 am, the dollar fell 0.29%, quoted at R$4.858.

The market is already practically unanimous in stating that the Central Bank should make a new cut of 0.50 percentage points, while in the USA the expectation is to maintain the current interest rate of 5.50% per year.

Investors want to analyze, however, the communication between the two central banks, looking for clues about subsequent decisions.

In Brazil, the question is whether there is room for further reductions in interest rates at the next Copom (Monetary Policy Committee) meetings. Signs such as the cooling of services inflation in August encouraged part of the market about an acceleration in the pace of Selic cuts, but the persistence of risks to the process of reducing price increases still raises fears.

In the US, the discussion is whether new interest rate increases will still be necessary this year. Although the latest US inflation data came in line with expectations and showed a drop in the core (which excludes more volatile prices), the recent rise in oil prices and strong data on the country’s economy suggest that monetary tightening may continue.

In Europe, the Bank of England also releases its decision on interest rates this week amid investor optimism, following the release of inflation data this morning. The CPI (consumer price index) slowed to 6.7% in August, compared to 6.8% in the previous month, putting pressure on the country’s central bank to pause its interest rate hike.

On Tuesday (19), the Stock Exchange had a volatile session, recording another day of decline and losing 118 thousand points, following the market abroad, while the dollar rose, with investors trading cautiously precisely because of the decision on interest rates in the United States From this week.

The fall on the Stock Exchange was led by “small caps”, smaller companies more linked to the domestic economy, in a scenario of rising future interest rates in Brazil. The financial sector also put pressure on business, and the Ibovespa closed down 0.37%, at 117,845 points.

Brazilian interest curves followed the rise in American bond yields, which, in turn, were impacted by expectations about the Fed (Federal Reserve, the American central bank) meeting.

In this scenario, the dollar also gained strength and rose 0.36%, ending the day at R$4.873.

In Brazil, investors also reflected this Tuesday on the release of the IBC-Br, the Central Bank’s economic activity index, which was better than expected by the market and indicated a gain in economic strength.

After the release of the IBC-Br, future interest rate curves, which embody expectations about the Selic, registered an increase, following American bonds. Contracts expiring in January 2025 went from 10.43% to 10.49%, while those for 2027 went from 10.34% to 10.44%.

Two professionals interviewed by Reuters stated that the IBC-Br numbers ended up not influencing the Brazilian interest curve. According to one of them, the downward revision of the June data ended up canceling out any effect of the July increase.

As a result, US bond yields were the main catalyst for the rise in future interest rates in Brazil, motivated precisely by doubts about the Fed’s upcoming decisions and the rise in oil prices, which is one of the biggest risks for US inflation this year. .

In this scenario, “small caps”, smaller companies and more linked to the domestic economy, led the day’s losses. The biggest fall of the session was GPA (7.35%), also impacted by a target price cut made by Bank of America, while Gol and Yduqs also appeared among the main losses. The B3 index that brings together these companies fell 0.95%.

“These assets are sensitive to the behavior of the interest curve, with GPA and Gol being related to domestic consumption, and Totvs is a tech, which historically trades at high multiples. With the rise in future interest rates, these actions ended up being penalized”, he states Petrokas, from Quantzed.

The financial sector also put pressure on Ibovespa, with Itaú as the main bearer, which fell 0.84% ​​and was among the most traded shares of the session. Other banks, such as Bradesco and BTG Pactual, followed the downward movement, and the Stock Exchange’s financial index fell 0.84% ​​this Tuesday.

Companies linked to oil, which rose abroad, were the main point of support for the index. Petrobras and PetroRio, for example, rose 0.41% and 0.99%, respectively, and were among the most traded in the session.

Vale, in turn, ended the day with a slight increase of 0.11%.

In the USA, the main stock indices fell, also impacted by speculation about interest rates in the country. The S&P 500, Dow Jones and Nasdaq fell 0.22%, 0.31% and 0.23%, respectively.

With Reuters