O dollar closed at a firm high against the real on Thursday, in a seesaw after the sharp fall of the previous day, with market operators embedding in the prices a deep concern with the direction of the Budget and the position of the Minister of Finance. Economy in this embarrassment.
The spot dollar rose 1.49% to 5.7143 reais. This reduced the accumulated drop in the week to 0.46%.
The real had the worst performance among the major global currencies in this session.
The bad repercussion for the Budget considered “fictitious” and approved by the Congress last week it heated up the mood even more between the minister Paulo Guedes and the Legislative, which has raised doubts about the capacity of the political articulation of the government and Guedes to achieve an adjustment in the budget text.
The budget rapporteur, senator Marcio Bittar (MDB-AC), agreed to cut parliamentary amendments by 10 billion reais, but Guedes’s team still sees the measure as insufficient.
In the market, the understanding is that the tensions between Guedes and the mayor, Arthur Lira (PP-AL), are growing, at a time when financial agents are still discussing the impacts of the recent ministerial reform made unexpectedly by the president Jair Bolsonaro.
“Paulo Guedes and his team are fighting to be able to approve a realistic budget, but the impression it gives is that you either tie or lose,” said a manager, assessing that the country has gained yet another element to worry about, because, according to he, until recently, there were no problems on the budget front.
The perception that fiscal risk has increased is shared by Santander Brasil, which sees Brazil as a “more difficult test” for economic policy since the spending ceiling was approved in 2016. “We see increasing execution risks for the consolidation process fiscal, ”said the bank’s chief economist, Ana Paula Vescovi.
For her, “nothing is more emblematic” of the fiscal risk than the “frantic fluctuation” of the exchange rate, which has already varied this year between about 5.12 reais and 5.87 reais, against a rate of around 4.30 reais before the pandemic and the increase in the premium in the 10-year nominal interest rate, which went from 2% in early 2020 to around 4.5% recently close to the peak seen in the loss of investment grade in 2015.
According to Vescovi’s calculations, if he were following his peers, the real would be close to 4.50 per dollar.
With the risk premium embedded in the exchange rate and the scenarios for currency drivers, the projection for the dollar at the end of 2021 was raised from 5.25 reais to 5.55 reais.
O Goldman Sachs (GS) sees the dollar at 5.00 reais in 12 months. Caesar Maasry, head of emerging markets strategy for the bank’s research group, acknowledges the fiscal risks that afflict the markets, but says that, from the external point of view, the balance of the balance for the exchange rate today is the prospect of recovery economical.
Maasry foresees an acceleration of vaccination in Brazil in the second semester, which will be accompanied by a stronger reopening of the economy. “This recovery is going to come and it will catch the undervalued real. This will lead the currency to outperform its emerging peers, ”he said.
According to a Reuters survey, the dollar will stay at 5.31 reais in 12 months.
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