The dollar posted a strong increase on Wednesday (26) and reached over R$ 5.51 at its peak for the day, in a session of widespread advance of the American currency against other currencies abroad.
The movement was accelerated by statements from President Luiz Inácio Lula da Silva (PT) about Brazil’s fiscal situation.
This morning, Lula questioned the need to make budget cuts to improve the government’s fiscal balance. The president stated that it will be necessary to analyze whether the issue can be resolved by increasing revenue.
“The problem is not that we have to cut. The problem is to know if it is really necessary to cut or if we need to increase revenue,” said the president.
Lula also added that his government is analyzing whether there is “excessive spending,” but that this is being done “without taking into account market nervousness.
“Abroad, the U.S. dollar was advancing against major currencies, especially against the yen, which hit its lowest level since 1986.
This keeps the foreign exchange markets on alert for any signs of intervention by Japanese authorities to boost their currency.
At 10:40 am, the dollar was up 1.07%, trading at R$ 5.513, while the Ibovespa was down 0.61%, at 121,578 points.
Market analyzes inflation data released on Wednesday – Dado Ruvic/ReutersIn Brazil, the IBGE (Brazilian Institute of Geography and Statistics) reported that the Broad National Consumer Price Index-15 (IPCA-15) slowed to 0.39% in June, after reaching 0.44% in May, according to data released on Wednesday (26) by the IBGE.
This month’s result was below the market’s expectations median. Analysts surveyed by Bloomberg projected a new variation of 0.44% in June.However, in 12 months, the IPCA-15 gained strength and accumulated inflation of 4.06%, according to the IBGE.
In this timeframe, the rate was 3.70% until May.César Garritano, chief economist at Somma Investimentos, assesses that the short-term inflation dynamic is benign.
He states, however, that there is still room for improvement in expectations. In the local scenario, the continuation of favorable external accounts and tight monetary policy may help achieve lower inflation levels. Abroad, a possible interest rate cut in the U.S.
could also be beneficial.”This more benign scenario can only become palpable if the government puts into practice measures that can, at least, contain the huge wave of pessimism that has taken hold in the markets.
The announcement of a good name to lead the Central Bank and actions that point towards respect for the fiscal framework seem to be essential conditions for the coming weeks and months,” says Garritano.
On Tuesday (25), the dollar rose 1.17% and closed at R$ 5.454 with investors reacting to the minutes from the last meeting of the Copom (Monetary Policy Committee) and amidst external pessimism, following tougher comments from a Federal Reserve official on the future of U.S.
interest rate policy.Meanwhile, the Ibovespa fell 0.24%, to 122,331 points, breaking a streak of five consecutive gains.
