Dollar soars with pressure from the external scenario and delays in spending cuts in Brazil

It rose 1.05% this Friday (8), ending the day at R$5.735. The rise was driven by investor disappointment with recent economic stimulus measures in China and uncertainty over the Brazilian government’s spending cuts package. At the same time, the inflation index (IPCA) in October exceeded expectations, which brought more concern to the market about controlling inflation in Brazil. In , the index fell 1.42%, reaching 127,829 points, pressured mainly by the fall in Vale’s shares, due to the drop in commodities on the international scene.

In the international context, the Standing Committee of the National People’s Congress of China approved a local government debt refinancing package worth 10 trillion yuan (approximately R$8 trillion). The market expected a higher value, which generated uncertainty about China’s ability to cushion the impacts of a wider trade war, especially if Donald Trump, recently elected US president, implements high trade tariffs, which he has promised to increase to up to 60 % on Chinese products.

In Brazil, the market remains attentive to the definition of a package of expense cuts promised by the federal government to increase fiscal sustainability. The expectation is that President Luiz Inácio Lula da Silva (PT) will present the measures soon, but the delay increases uncertainty among investors. In October, the IPCA registered an increase of 0.56%, above the forecast of 0.54%. As a result, inflation accumulated in 12 months was 4.76%, while the target for 2024 is 3%, with a margin of 1.5 percentage points more or less. On Wednesday, the Copom (Monetary Policy Committee) raised the Selic rate to 11.25% per year. In contrast, the Federal Reserve (Fed), the US central bank, reduced the interest rate by 0.25 percentage points, putting it between 4.5% and 4.75% per year, a measure that eases the monetary tightening in the country.

Published by Felipe Dantas

*Report produced with the help of AI