The real gains value against the dollar, with the local foreign exchange market going against the global trend. The Copom meeting confirmed expectations of an 0.50% hike in the prime interest rate, raising the Selic to 13.75% per year. The Central Bank maintained its harsh tone, signaling that the focus is to bring inflation to the target in 2023. And thus, a new high for September is not ruled out. However, long-term optimism prevails and so does the idea that the cycle of high interest rates is nearing its end. This led to the revaluation of some assets, especially those linked to commodities and the retail sector, which attracted investors. And higher interest rates also favor carry-trade operations, which play in favor of the local currency and against the dollar. This sum of factors helps to explain the detachment of the local foreign exchange market from the DXY index.
On the external scene, risk aversion grows in the face of geopolitical tensions between China and the US. Signs from the Fed and the technical recession in the United States are also on the radar. It is good to remember that the US economy shrank 0.9% in the second quarter of 2022. The weak GDP may reinforce the Fed’s softer stance at the next FOMC meetings. However, the indications of the resilience of inflation generate concern.
In general terms, the Fed’s stance and the brake on the global economy must continue to impact scenarios and resource allocation. The risk premium in Brazil remains high, in line with fiscal and political fears. And this must serve as a barrier to a more significant devaluation of the dollar against the local currency.