See the dollar quote today – 08/04/2023 – Market

The dollar opened slightly higher this Friday (4) after registering a strong rise in the previous session, impacted by the expectation of a faster fall in the interest rate differential in Brazil with the 0.50 percentage point cut in the Selic rate made this week .

The Brazilian Stock Exchange closed down 0.19% on Thursday (3), at 120,585 points. Despite having benefited from the drop in interest rates, the Ibovespa was impacted by a profit-taking movement throughout the day.

At 9:11 am (Brasília time), the spot dollar advanced 0.19%, to R$ 4.9088 in the sale. On B3, at 9:11 am (Brasília time), the first contract dollar futures contract fell 0.22%, to R$ 4.9330.

The expectation of a faster fall in the Selic in Brazil made the dollar soar against the real, since the high level of rates makes the real interesting for use in “carry trade” strategies, which consist of borrowing in a low interest rate country and application of these resources in a more profitable market. The more the Selic falls, the more Brazil will lose its advantage in the “carry trade”.

Thus, with the expectation of lower profitability in Brazilian fixed income, investors tend to reallocate their resources in more profitable markets.

Future interest rates, by the way, had a sharp drop in the shorter curves. Contracts maturing in January 2024 increased from 12.64% to 12.46%, while those for 2025 fell from 10.67% to 10.49%. Those for 2026 rose from 10.04% to 9.985%.

The longer curves, however, which had already priced in a greater fall in the Selic, rose this Thursday. Interest rates for 2027 went from 10.08% to 10.11%, and those for 2028 rose from 10.30% to 10.40%.

In addition, the US currency is also supported by the risk aversion environment abroad, after the release of weak data on the Chinese and European economies.

Despite the strong rise of the dollar this Thursday, economists point out that there is still room for the currency to fall against the real in the coming months, as an eventual outflow of resources from Brazilian fixed income can be offset by optimism in variable income, which is benefited by the drop in interest rates.

The start of the interest rate cut should support companies on the Brazilian stock exchange, and projections on the Selic even boosted the performance of the Ibovespa in recent sessions.

This Thursday, however, the Bolsa was impacted by a profit-taking movement, that is, when investors sell stocks that have recently appreciated strongly to make gains, which overshadowed the positive effect of the Selic cut for Brazilian variable income.

The drop was driven mainly by Eletrobras shares, which fell 5.15% after the Panel SA column of Sheethaving reported that the Angra 3 nuclear power plant was not included in the PAC (Growth Acceleration Project), a program that the Lula government intends to launch soon.

Losses by Ambev (1.46%), which reported a 15% drop in net income for the second half, and by Bradesco (0.71%), which is releasing its second-quarter balance sheet this Thursday, also pressured the Ibovespa.

On the positive side were the “small caps”, smaller companies more linked to the domestic economy, which, consequently, are more sensitive to interest rate drops. Increases by Dexco (5.26%), Minerva (2.93%) and Cyrela (2.78%) were the highlights and were among the biggest gains of the session.

In the United States, the main stock indices also closed slightly lower. The S&P 500, Dow Jones and Nasdaq all fell 0.25%, 0.19% and 0.10% respectively.

With Reuters