Rising political risk in Brazil makes dollar rise above R$5 level again

RIO DE JANEIRO, BRAZIL – The commercial dollar is trading higher on Wednesday and has returned to the US$5 level, with the domestic political scene in focus. At 10:44 AM, the U.S. currency was 1.13% higher at R$4.9975, reaching R$5.0109 at the maximum.

The focus of attention of financial agents is the emergence of a new accusation against the government in the purchase of vaccines after the “Folha de S.Paulo” reported that a director of the Ministry of Health demanded a bribe to close the deal for 400 million doses of vaccine.

A vaccine salesman for Davati Medical Supply in Brazil, Luiz Paulo Dominguetti, alleged that the ministry’s logistics director at the time, Roberto Dias, demanded a bribe of US$1 per vaccine dose from him. Luiz Paulo Dominguetti must attend the Covid CPI on Friday.

For analysts, the accusation is the main catalyst of the foreign exchange market in today’s trading session, in which the real is quite far from other emerging countries’ currency pairs, against which the dollar is giving mixed signals at the moment.

Some market participants interviewed fear that the political left in Brazil will go all out to bring Bolsonaro down by means of the highly politicized Covid-19 situation in Brazil, much like what happened to Donald Trump in the United States.

On interest rates, in addition to political risk, the prospect of increased inflationary pressures remains on the radar after the National Electric Energy Agency (Aneel) opened a public consultation in August for another increase in the Red Flag 2 tariff.

Central Bank President Roberto Campos Neto was expected to begin speaking today in a webinar on digital currencies hosted by the agency, in an event that should be closely watched by market players looking for signs of monetary policy behavior in the context of energy price pressures.

Interest rate futures are rising: The January 2022 Interfinancial Deposit Futures (DI) contract rate increased to 5.625% from 5.61% in the previous adjustment; the January 2023 DI increased to 6.99% from 6.94%; the January 2025 DI increased to 8.01% from 7.95%; and the January 2027 DI varied to 8.47% from 8.40%.

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