The dollar is falling after yesterday’s sharp rise, but the climate remains tense due to high political risk.

Luana Maria Benedito

SAO PAULO (Reuters) – The dollar was falling, but this Thursday morning it continued to trade around R $ 5.30 and investors believe it has room to hit even higher levels amid strong domestic institutional tensions that have recently exacerbated The most President Jair Bolsonaro’s aggressive speech.

At 10:18 am, the dollar was down 0.44% to hit R $ 5.3004 on sale. Although it was in negative territory for most of the morning, the dollar briefly traded higher, hitting R $ 5.3350 on a sell (+ 0.21%) session in the session high, reaching around 9:40 am.

On B3, dollar futures fell 0.39% to R $ 5.313.

According to Vanya Nagema, responsible for exchange bureau Terra Investimentos, the drop in the dollar seen at the start of business on Tuesday will only be a small profit-taking, while the market climate remains extremely pessimistic.

“I think today is going to be a nervous day, the same political pressure will continue” the day before, when the dollar jumped 2.84% to close to R $ 5.3236, the highest daily percentage gain since June 24, 2020 (+ 3.33%).

Against the backdrop of institutional uncertainty generated by “arm wrestling” between powers, “the market trend will be even higher and in the short term, the dollar may fall to 5.40 reais,” Nagem said.

Marcos Weigt, head of Treasury at Travelex Bank, agrees that tensions in Brasilia should continue to hamper real capital returns. “I find it very difficult for the dollar to stay below R $ 5.30 in the short term, unless there is a major game change in politics,” he said.

According to him, if it were not for the intensive cycle of raising interest rates by the Central Bank, which increases the attractiveness of a real carry-trade strategy, the dollar would have been at an even higher level.

Investors, who have been wary of the domestic scenario for weeks amid concerns about the government’s ability to meet its commitments and meet the budget ceiling, have increased their vigilance following Bolsonaro’s speech in the Sept. 7 acts.

On this occasion, Bolsonaro attacked in front of supporters the ministers of the Federal Supreme Court (STF) Alexander de Moraes and Luis Roberto Barroso and threatened to defy the decision, saying that he would never be arrested by “villains.” Bolsonaro reiterated that he would only leave the presidency “in captivity, dead or victorious.”

Raising concerns in the markets, truck drivers stopped traffic on roads in support of the government at dawn in several Brazilian states. The president will meet with this category this morning Thursday, Bolsonaro told supporters.

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