Dollar nears stability in Brazil amid end-of-year flows

After oscillating below R$5.40 in the morning, the dollar strengthened and closed Monday close to stability against the real, with market professionals citing the traditional outflow of resources from the country at the end of the year to justify this movement.

The dollar’s rally in Brazil bucked the trend overseas, where the U.S. currency fell against most currencies during the day.

The spot dollar closed with a slight increase of 0.16%, to R$5.4215. Over the year, the currency accumulated a decline of 12.26%.

At 5:12 p.m., the dollar futures contract for January – currently Brazil’s most liquid – rose 0.16% on the B3, to R$5.4380.

The day began with the dollar falling in Brazil, following the currency’s decline against other foreign currencies, while investors also weighed activity data released by the Central Bank.

British Columbia reported that its economic activity index (IBC-Br) fell 0.2% in October compared to September, in the seasonally adjusted series. The result of this indicator, considered a signal for gross domestic product (GDP), was worse than the median projection of economists heard by Reuters, an increase of 0.10%.

Compared to the same month of the previous year, the IBC-Br increased by 0.4%, while during the 12-month period it increased by 2.5%, according to the series without seasonal adjustment.

The IBC-Br is another of the recent indicators that corroborate the perception of a slowdown in the Brazilian economy, a factor that was highlighted by the agents who projected a drop in the base rate of the Selic during the January meeting of the BC.

Currently, the Selic rate is 15% per year, while in the United States the Federal Reserve’s benchmark rate is between 3.50% and 3.75%.

This interest rate differential between Brazil and the United States has been identified as one of the factors attracting investments to the country, keeping dollar prices at lower levels.

In this scenario, the spot dollar reached a minimum price of R$5.3815 (-0.58%) at 10:03 a.m., in line with the decline also observed abroad.

From that point on, however, the North American currency began to strengthen, with some agents taking advantage of the falling prices to purchase foreign exchange. Professionals interviewed by Reuters stressed that this movement was linked to the traditional sending of resources abroad, at the end of the year, by companies and funds.

At 3:29 p.m., the spot dollar reached a maximum of R$5.4265 (+0.25%).

Overseas, one of the highlights was the sharp fall of the dollar against the yen, as agents anticipated an imminent rise in interest rates in Japan. The dollar also suffered losses against a basket of hard currencies for most of the session.

At 5:11 p.m., the dollar index, which measures the performance of the American currency against a basket of six currencies, fell 0.11% to 98.304.