Dollar goes to R$ 5.42 with global pessimism and fiscal risk on the radar; Bag sinks 3% – Prime Time Zone

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Investors follow signs of cuts in monetary stimulus in the US and negotiations for the extension of emergency aid in Brazil

ROBERTO GARDENALLI/FUTURA PRESS/ESTADÃO CONTENTDollar accelerates with international fear and uncertainties in the domestic scenario

The main indicators of financial market Brazil closed in the negative field on Tuesday, 28, with the pessimism in the global scenario and the return of fiscal risk to the country. O dollar closed with a high of 0.85%, at R$ 5.424. This was the highest exchange rate since May 4, when it closed at R$ 5.430. The dollar hit the maximum of R$5.451, while the minimum was no more than R$5.389. The North American currency closed the eve with a high of 0.65%, at R$ 5.378. Following the bad mood in international markets, the Ibovespa, a reference on the Brazilian Stock Exchange, ended the day with a drop of 3.05%, to 110,123 points. The trading session of this Monday, 27th, closed with a high of 0.3%, at 113,583 points. In the international scenario, the dollar maintained an advantage over emerging currencies with the rise in interest rate expectations in the United States. The movement follows the advance of inflation and signals from the US Central Bank (Fed) to anticipate the cut in monetary stimuli with the rise in interest rates, currently at minimum levels, and the reduction in the purchase of US$ 120 billion monthly in government bonds. “This increase in interest expectations weighs mainly on technology stocks, we are seeing a generalized sale movement in the technology sector, bringing a negative trend to the Stock Exchange”, says the specialist in shares at Clear Corretora, Pietra Guerra.

On the domestic agenda, investors’ mood was pressured by the return of fiscal risk and the impacts on the trajectory of the country’s public debt. In the minutes of the meeting that raised the Selic to 6.25% per year, the Monetary Policy Committee (Copom) stated that the increase in Broad Consumer Price Index (IPCA), the official Brazilian inflation gauge, is pressured by federal government spending to fight the new coronavirus pandemic. “Despite the recent improvement in public debt sustainability indicators, the high fiscal risk continues to create an upward asymmetry in the balance of risks, that is, with trajectories for inflation above that projected in the relevant horizon for monetary policy.”

O federal government seeks an agreement to extend the emergency aid at least until December, but finds resistance in the economic team led by Paulo Guedes. TO Young pan, Executive assistants stated that the Ministry of Citizenship dialogues directly with people close to the president Jair Bolsonaro (no party) and with congressional leaders to extend the social benefit, which is due to end in October. The negotiations are moving towards adding two months to the calendar, a period seen as sufficient for the Union to be able to define the sources of funds for the Brazil Aid, the social program designed to replace the family allowance. According to information, the extension should maintain the contingent of 39 million Brazilians currently registered, and monthly fees from R$ 150 to R$ 375. The main argument of the Citizenship folder is to cover the approximately 25 million people who do not comply with the poverty criteria necessary to integrate the new social program, which is expected to cover 17 million families, while the country is still dealing with the consequences of the crisis, such as the acceleration of inflation and the maintenance of the unemployment rate at a high level. The day before, the Chamber of Deputies and the Senate approved a bill that amends the Budget Guidelines Law (LDO) of 2021 and allows the allocation of resources to the Brazil Aid. The text authorizes the use of legislative proposals that are still being processed as a form of compensation or mandatory expenditure increase for income transfer programs, such as the Auxílio. With that, the government intends to use the collection that will be brought by the Income Tax reform to fund the program.