The commercial dollar closed this Thursday (28) up 1.30%, quoted at R$5.989 on sale. The American currency renewed the record reached in the previous trading session and reached the highest nominal value in history. During the session, the currency reached R$6.003 (at maximum) and R$5.946 (at minimum).
The strong increase is a reaction from the financial market, which received the Lula government’s spending cut package with distrust. On Wednesday (27), the dollar ended the day at R$5.912.
The Minister of Finance, Fernando Haddad, detailed the measures, including the exemption from Personal Income Tax (IRPF) for those earning up to R$5,000. The expansion of the exemption range must be offset by higher taxation for those earning more than R$50,000. According to the government, the package should generate savings of R$70 billion.
SEE ALSO:
- From spending “moderation” to taxing the rich: the government package, point by point
The currency opened trading at R$5.99, dropped to R$5.96, but shot up to R$6 at the end of the morning and spent the rest of the period fluctuating until the opening high. Around 12:30 pm it was priced at R$5.99, an increase of 1.38%. At 1:10 pm and 1:34 pm it reached R$6 again until it oscillated downwards again.
The reasons for the market’s distrust in relation to spending cuts
The main financial market assessments indicate that the announced measures are considered modest and may be insufficient to guarantee fiscal balance in the long term. Economist Tiago Sbardelotto, from XP, noted that a large part of the package is limited to offering greater administrative flexibility, without promoting significant changes in the trajectory of public expenditure.
Paula Zogbi, research manager at Nomad, highlighted that changes to Income Tax, although they aim to redistribute income, could result in a drop in revenue, compromising planned spending cuts and potentially contributing to increased inflation.
João Kepler, CEO of Equity Fund Group, highlighted that the package intensified economic uncertainties, reflected in the appreciation of the dollar and the drop in interest from international investors in Brazilian assets.
SEE ALSO:
- Dollar breaks record with announcement of expansion of the IR exemption range
- Government wants to tax exempt earnings of the richest and limit the scope of IR correction
