Dollar trajectory divides analysts: Will the currency drop further or stabilize?
RIO DE JANEIRO, BRAZIL – For part of the market, factors that led to the recent depreciation of the U.S. currency have been priced in; but some see room for additional declines.
The dollar fell back to R$5.20 this week, the lowest level since January. The Brazilian currency led the gains on Thursday, May 6th, in a scenario of global investors’ renewed appetite for risk and an increase in the basic interest rate in the country. The spot dollar traded down 0.45% at 10 AM on Friday, May 7th, at R$5.25, on its way to the sixth straight week depreciating.
The change in the trajectory of monetary policy is one of the factors behind the 10.4% drop in the future dollar since its peak above R$5.88 reached in March — the other factors were a positive external scenario and agreement on the Budget. Significantly, the SELIC rate increased from 2% a year in March to 3.5% this week.
What comes next is dividing market analysts and exchange rate experts. Read their analyses below:
Roberto Secemski and Juan Prada from Barclays:
“We believe that the slow restoration of the carry trade and the potential decompression of risk are positive for the real and we would expect a bullish trend for the currency,” Secemski and Prada said in a report. The private bank maintains a strategy that bets on the drop of the U.S. currency.
Paulo Clini, chief investment officer at Western Asset:
“There doesn’t seem to be the same room for appreciation of the real seen in the past month. A relevant part of the commodities shock and some monetary policy signaling seems to be already priced in.”
João Leal, economist at Rio Bravo Investimentos:
“The fiscal aspect is still weighing heavily. And by the end of the year we will have more political noise.” Leal maintained his estimate of the dollar at R$5.40 at the end of 2021 and 2022.
Morgan Stanley analysts:
“The current interest rate hike cycle should provide some support to the real, but less than expected by some market players, as key foreign exchange drivers should maintain the idiosyncratic risk premium still high,” Morgan Stanley professionals said in a report. “Therefore, we maintain a more cautious outlook on the real,” they concluded.
Live Market IntelligenceBrazil — Live Market Board
Rio Times · Live Market Intelligence
Brazil — Live Market Board
+1.85%
171,031.73
+1.85%
65,729.18
+2.14%
11,338.38
+0.89%
2,913,184
+1.30%
2,459.23
+0.61%
58,698.13
+2.60%
| Instrument | Last | Change | YoY | Prev. | High | Low | Volume |
|---|---|---|---|---|---|---|---|
| IBOV | 171,031.73 | +1.85% | +21.85% | 167,927.15 | 168,310 | 167,142 | — |
| USD/BRL | 5.16 | +0.01% | -5.13% | 5.16 | 5.18 | 5.14 | — |
| SELIC | 14.00% | — | — | — | — | — | |
| PETR4 | 41.64 | -0.05% | +35.19% | 41.66 | 41.97 | 41.15 | 41,499,400 |
| VALE3 | 72.97 | +0.83% | +30.75% | 72.37 | 73.54 | 72.66 | 17,658,000 |
| ITUB4 | 38.60 | -1.03% | +4.57% | 39.00 | 39.34 | 38.39 | 29,487,800 |
| BBDC4 | 16.85 | +0.36% | +3.50% | 16.79 | 16.90 | 16.67 | 19,416,900 |
| BBAS3 | 19.37 | +0.47% | +0.73% | 19.28 | 19.44 | 19.16 | 11,069,200 |
| B3SA3 | 14.26 | -0.21% | +12.73% | 14.29 | 14.47 | 14.11 | 33,037,800 |
| ABEV3 | 14.89 | -0.80% | +21.91% | 15.01 | 15.07 | 14.81 | 16,453,100 |
| WEGE3 | 47.59 | +0.49% | +29.99% | 47.36 | 48.08 | 47.36 | 3,364,600 |
| PRIO3 | 59.14 | -0.19% | +50.67% | 59.25 | 59.81 | 58.74 | 3,325,600 |
| SUZB3 | 41.33 | +2.35% | -23.55% | 40.38 | 41.48 | 40.35 | 3,914,900 |
| RENT3 | 34.68 | -0.09% | +0.84% | 34.71 | 34.96 | 34.35 | 7,979,100 |
| AZZA3 | 15.89 | -2.63% | -53.76% | 16.32 | 16.42 | 15.82 | 1,330,300 |
| CSNA3 | 4.30 | +0.47% | -42.65% | 4.28 | 4.41 | 4.26 | 10,076,100 |
| GGBR4 | 24.69 | +2.19% | +51.38% | 24.16 | 24.85 | 24.18 | 7,047,600 |
| ENEV3 | 24.21 | -1.38% | +70.49% | 24.55 | 24.64 | 23.99 | 9,297,000 |
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