Dollar and interest rate futures higher in early trading; local issues predominate (August 30)

RIO DE JANEIRO, BRAZIL – The dollar started Monday in a moderate rise, accompanied by the future interest rates, as investors evaluated the tumultuous domestic scenario and the signals from international markets, waiting for a busy agenda throughout the week.

Around 10 AM, the commercial dollar was advancing 0.31% to R$5.2096, reflecting the domestic fiscal and political uncertainties. The dollar registers slight advances against the Turkish lira and Russian ruble in the foreign currency market, operating stably against the Mexican peso and retreating against the South African rand.

Federal Reserve (Fed, U.S. central bank) Chairman Jerome Powell said last Friday that the start of reducing stimulus could begin this year, without specifying the timing.

Aside from the statement that an early rate hike could be harmful, this perspective of maintaining stimulus supports and leads to the increased search for risk assets abroad. Nevertheless, domestic risks remain on the radar of financial players.

“The real has been ‘surfing’ some improvement in recent sentiment regarding the perception of the trajectory of local debt, but risks around precatórios [court-ordered federal debt payments] or even assistance programs with a delicate source of funding (risk to the spending cap) continue as a ‘black cloud’ in the local market,” report some market participants, also citing the difficult political-institutional crisis Brazil is experiencing between the president and the Supreme Court.

The rate of the Interfinancial Deposit (DI) contract for January 2022 oscillated from 6.76% in the previous adjustment to 6.75%; the DI for January 2023 advanced from 8.44% to 8.475%; the contract for January 2025 had a high from 9.35% to 9.40%, and the DI for January 2027 escalated from 9.71% to 9.78%.

The agenda of indicators gain traction this week, focusing on the release of Brazil’s GDP for the second quarter and the August general employment report in the United States.

Today, the General Price Index – Market (IGP-M) for August showed an increase lower than expected, of 0.66%, against a median of 0.86%, according to Valor Data.

In the Focus report published by the Central Bank, the average estimates for the nationwide consumer price index (IPCA) for 2021 increased again, from 7.11% to 7.27%. Estimates for IPCA for 2022 ranged from 3.93% to 3.95%.