Dollar closes practically stable, but drops 2.24% in the week with ‘China effect’ By Estadão Conteúdo

2023-09-16 10:00:25

© Reuters Dollar closes practically stable, but drops 2.24% in the week with ‘China effect’

In a lukewarm session with moderate liquidity, cash ended the trading session this Friday, 15th, down 0.03%, quoted at R$ 4.8712. There was a fluctuation of just under two cents between the minimum (R$ 4.8599) and the maximum (R$ 4.8794). A thermometer of business appetite, the contract for October is worth just over US$10 billion.

According to operators, after the 1.61% devaluation of the currency in the last two trading sessions, investors preferred to adopt a more cautious stance waiting for the monetary policy decision here and in the United States, on the so-called “super Wednesday”, 20. The recent recovery of commodity prices, following a sequence of more encouraging data from the Chinese economy and monetary stimuli by the People’s Bank of China (PBoC, the Chinese Central Bank), would already be incorporated into the exchange rate.

After approaching the psychological ceiling of R$5.00 last week, the dollar ended this week down 2.24%, returning to levels seen at the end of August. New rounds of appreciation of the real would depend, according to operators, on the announcement of more stimulus for the Chinese economy and a reduction in Treasury rates. Here, investors are waiting for signs that the government will be able to approve projects in Congress that increase revenues to get closer to the target of a neutral primary result in relation to GDP next year.

Outside, the index was slightly lower and was around 105,300 points at the end of the afternoon, with a moderate recovery in the euro, which yesterday fell to its lowest level in relation to the dollar since March in the wake of a signal from the European Central Bank (ECB) that the The process of raising interest rates in the region has already ended. In comparison with emerging currencies and commodity exporting countries, the dollar showed mixed behavior, including real pairs.

“The real has been appreciating due to the apparent improvement that has been occurring in China’s economy. The Asian country is a major buyer of commodities and takes after Brazil, with our trade balance”, says the CEO of Transferbank, Luiz Felipe Bazzo, highlighting that there is also a “more predictable outlook in relation to interest rates abroad”.

Last night, the PBoC reduced the interest rate on repurchase contracts (repos) and injected 34 billion yuan ($4.67 billion) into the market to maintain liquidity. It is the first time since January that the Chinese monetary authority has adopted such a measure. This week, the Chinese BC had already reduced banking requirements. Furthermore, data on industrial production and sales in China in August exceeded analysts’ estimates. Although there are still doubts among economists about the Chinese government’s ability to achieve growth targets, recent actions have brought about a more favorable environment for commodities.

Investment analyst Alex Martins, from Nova Futura, observes that, in addition to traditional monetary stimuli, China has adopted other relevant measures to boost the economy, such as relaxing rules for insurance companies to invest in shares and making it easier to take out real estate credit, the which contributes to the recent increase in loan granting.

“The fact that China has slightly increased the scope of stimuli has brought the perception that the government can adopt measures for other segments, which favors commodities”, says Martins. “Combined with the ECB’s end-of-cycle signal and the possibility that the Fed (Federal Reserve, the American Central Bank) will no longer raise interest rates, the rise in commodities led to the fall of the dollar.”

Monitoring by the CME shows that bets are practically unanimous that the Fed will announce next Wednesday that the interest rate will remain in the range between 5.25% and 5.50%. Furthermore, the chances of there being no further increase in FedFunds this year are around 60%. US consumer and producer inflation readings released this week were practically in line with expectations.