Dollar closes higher and breaks a new nominal record, at R $ 5.90; Bag falls – 05/13/2020

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The commercial dollar closed up 0.61%, selling at R $ 5.901 on sale. It was the third consecutive advance and the currency broke for the second day the nominal record (without considering inflation) since the creation of the Real Plan. In the year, the dollar accumulated an increase of 47.06%.

The Ibovespa, the main index of the Brazilian stock exchange, closed down for the third consecutive day. The decline today was 0.13%, at 77,772.20 points. It is the lowest level in more than a month since April 10 (77,681.94 points).

The dollar value released daily by the press, including the Twitter, refers to the commercial dollar. For those who are going to travel and need to buy currency at foreign exchange brokers, the value is much higher.

US Central Bank announcement frustrates investors

The dollar started the day down, but started to rise after Fed Chairman Jerome Powell said the United States could face a “prolonged period” of weak growth. He added that the Fed does not consider using negative interest rates as a tool to stimulate the economy.

“I had an expectation from the market that Powell could signal negative interest rates in the US after the [presidente norte-americano] Donald Trump renewed pressure on the issue yesterday, “Luciano Rostagno, chief strategist at Mizuho bank, told Reuters news agency.” Powell’s speech frustrated investors and made the markets turn. “

Government worsens expectations for GDP

The government today announced a worse expectation for the performance of the economy this year and started to see a GDP (Gross Domestic Product) of -4.7% in 2020. The previous projection, published in March, was slightly higher than 0.02 %.

In addition, the official inflation forecast went from 3.05% at the end of the year to 1.77%, below the floor of the official government target, which is 4%, with a margin of 1.5 percentage points for more or less, that is, it may vary between 5.5% and 2.5%.

The estimates were released this morning by the Ministry of Economy, and take into account the halt in the activities of several sectors in the country because of the coronavirus pandemic.

In Brazil, political scene brings apprehension

On Wednesday, President Jair Bolsonaro said he could release part of the video from the April 22 meeting. Former Minister Sergio Moro says that at that meeting, the president tried to interfere with the Federal Police. People who have watched the video say it confirms Bolsonaro’s attempt at interference to protect his family.

Bolsonaro claims that he did not speak the words “Federal Police”, “superintendence” and “investigation” at the recorded meeting, but rather addressed the risks and the need to improve the safety of his children in Rio de Janeiro.

Bolsonaro also said that the minister of the Government Secretariat, Luiz Eduardo Ramos, “made a mistake” when he said that he would have cited the PF when collecting intelligence reports from various agencies.

“Here, the movement is a little more pronounced because we are in a very turbulent political environment,” said Luciano Rostagno, chief strategist at Mizuho bank.

On the night before, Bolsonaro said he discussed the dollar’s surge at a ministerial meeting, but said he could not comment on the matter because he would be advancing something “privileged”, which would “hurt” the market. The statements leave open whether the government is evaluating measures for the dollar market.

Dollar record does not consider inflation

The dollar record reached today considers the nominal value, that is, without discounting the effects of inflation, both in Brazil and in the United States.

Taking into account inflation in the USA and Brazil, the dollar peak after the Real Plan occurred at the end of the government of Fernando Henrique Cardoso (PSDB), on October 22, 2002. The nominal value at the time was R $ 3,952, but the updated amount would exceed R $ 7.

Making this correction is important because, over time, inflation alters the purchasing power of currencies. What you could buy with US $ 1 or R $ 1 in 2002 is not the same as what you can buy today with the same values.

* With Reuters

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