Dollar rises 0.74% and approaches R$5.50 on a day of fiscal caution

The Brazilian financial market ended this Tuesday (3) in decline, with the dollar rising and the stock exchange increasing losses after the re-election of president Luiz Inácio Lula da Silva.

The US currency advanced around 1%, closing close to R$5.50. The Ibovespa fell for the sixth time in a row and reached its lowest level since January.

Uncertainties about the government's fiscal policy and expectations for the Monetary Policy Committee's (Copom) decision on the Selic rate, scheduled for Wednesday (4), kept investors cautious.

Numbers of the day

Commercial dollar: R$5.486 (+0.74%);

Dollar maximum: R$5,509, around 1:50 pm

Dollar Index (DXY): 101.850 (+0.13%);

Ibovespa: 165,528.92 points (-1.42%);

Exchange

The commercial dollar ended this Tuesday's session with an appreciation of 0.74%, quoted at R$5.486. During the trading session, the North American currency surpassed the R$5.50 mark, amid investors' caution regarding the direction of Brazilian economic policy.

The movement occurred in the first trading session of November, after the All Souls' Day holiday and a week of strong devaluation of national assets. Since Lula's reelection on October 25, the foreign exchange market has registered pressure on the real.

Among the factors that influenced the negotiations were:

Fiscal uncertainties: doubts about the conduct of public accounts and the government's economic agenda;

Expectations for Selic: investors awaited the Copom decision, scheduled for Wednesday;

Economic proposals: repercussion of economist André Lara Resende's ideas about changes in the monetary regime;

International scenario: mid-term legislative elections in the United States and appreciation of the dollar against other currencies.

In the morning, the Minister of Finance, Dario Durigan, stated that Lara Resende's proposals have deficiencies and are not under discussion in the government. The minister also reinforced his defense of a gradual fiscal adjustment.

Abroad, the DXY index, which measures the dollar's performance against a basket of six strong currencies, advanced 0.13%, to 101,850 points, at 5:35 pm.

Stock exchange extends losses

The Ibovespa closed Tuesday down 1.42%, at 165,528.92 points, according to preliminary data. The index even lost the level of 165 thousand points during the session, reaching a minimum of 164,446.53 points, at 11:23 am.

The drop represented the sixth consecutive session of losses since Lula's re-election, considering the sessions held after the electoral result. In the last trading session before the polls were decided, the index was above 205 thousand points.

The shares of Petrobras and Vale, the most traded, contributed to the pressure on the indicator, in a session marked by adjustments in the international prices of oil and other commodities (primary goods with international prices) after the holiday.

The external scenario also influenced the negotiations. While shares of US technology companies recovered during the session, the Brazilian market remained pressured by domestic uncertainties.

Copom on the radar

The Monetary Policy Committee meeting focused investors' attention. The Selic rate is at 13.75% per year, and the market is monitoring the possibility of maintaining the current level in the face of worsening inflationary expectations and the devaluation of the real.

The Focus bulletin released this Tuesday raised the inflation projection for 2027 from 4.34% to 4.76%, above the target ceiling of 4.5%. The estimate for Selic at the end of next year also rose, from 11.75% to 12.50%.

The Central Bank's decision and the statement on the next steps of monetary policy should influence the behavior of Brazilian assets in the coming trading sessions.

* with information from Reuters