The dollar reaches its lowest level in a month and cancels the budget hike after the crisis

a The dollar reached the fifth decline against the riyal This Monday (19), with investors resting with budget rates and a new day of weakening of the US currency in the world.

Also read: The government and Congress reach an agreement to unlock the budget

On closing at its lowest level in nearly a month, the price trimmed gains made after the market’s strong negative reaction to Congress’s approval of the budget piece on March 25th.

The spot dollar is down 0.57% this Monday, to 5.5538 BRL sell, after ranging between 5.6232 BRL (+ 0.67%) and 5.5278 BRL (-1.03%).

Abroad, the dollar index lost 0.57%, to its lowest in six weeks. The emerging currencies index touched its highest level in the month.

In Brazil, the US currency went through its fifth trading session followed by devaluation, during which time it lost 3%. The dollar has not declined for several days in a row since the series of six losses that ended on May 27 last year.

The price is at the lowest level since March 23, 2021 (R $ 5.5168). On March 29, amid the financial turmoil, the currency closed with a maximum of 5.7681 reais, up 3.86% from this second level.

The dollar rose in this session until around 11:15 am, when a series of sell orders were triggered and the price was lowered. At the same time, the decline of the dollar index accelerated against a basket of foreign currencies abroad.

In general, global investors continued to reverse the perception that the central bank of the United States would maintain the stimulus indefinitely, while the global economic recovery increased demand for riskier assets, as is the case with emerging currencies – a group of which is the real one. part.

Despite all the volatility, the Brazilian currency has recently followed the behavior of its peers.

For Sérgio Goldenstein, an independent consultant at Ohmresearch Independent Insights, the real responded to a combination of a favorable external scenario and reduced the risk of the local tail.

“The tail risk would be a government decree of a public disaster, a greater expansion of fiscal spending … But it seems that the likelihood of that risk is very small now. With that, you won’t have a very serious deterioration in the public accounts this year,” he said.

In the week that President Jair Bolsonaro has to decide what to do with the controversial text of the 2021 budget approved by Congress, the market responded to information that the government and parliamentarians have reached an agreement on the issue.

The National Congress votes Monday on a bill that loosens, with government approval, expense rules to deal with the COVID-19 pandemic and allows the executive to cut discretionary expenditures by decree (not a law, as it usually happens). , Such as those related to the maintenance of general machinery, to ensure compliance with mandatory expenditures.

“The solution they will give to the budget is not perfect, but it seems that all this risk is lagging behind,” added Goldenstein.

Market analysts reiterate that the rial’s weakness is mainly due to the high financial risks in Brazil, with doubts about the sustainability of the debt and its potential impacts on economic growth trends.

The Brazilian currency fell 6.52% in 2021 in nominal terms, the third-worst performance of the year. Only the Argentine peso (-10.1%) and the Turkish lira (-8.2%) are dropping further.

Combining this year’s weakness with a drop of more than 20% in 2020, the riyal is the cheapest currency in the emerging world, according to a study conducted by the Bank of America based on exercise results with a new model for calculating a fair exchange rate.

With this approach, the rial is 24% cheaper than the fundamentals suggest, which is the largest negative deviation in the list of 20 emerging currencies. The fair value of the coin will be 4.26 per dollar.