On the day, at 2:09 p.m., the US dollar fell 0.29%, trading at R$ 5.0464. At its peak, it hit R$ 5.0845 – the highest nominal price.
On Tuesday (17), the commercial dollar, which is the reference in transactions between companies and banks, closed with a drop of 0.9% and ended the day at 5.002 reais. The tourist dollar closed at 5.20 reais, falling 0.4%.
After the Federal Reserve announced that, as an emergency measure, it will purchase debt directly from companies to ease credit markets, something that had not happened since 2008. The devaluation of the US currency reflected greater optimism in the market.
Central Bank and dollar
Central Bank interventions also helped support the currency. This morning, the Central Bank held a $2 billion line auction.
This morning, also after the first confirmed death in Brazil due to coronavirus, the dollar reached an all-time high, trading at 5.078 reais. Cristiane Quartaroli, a foreign exchange strategist at Banco Ourinvest, believes that the spread of the disease in the country could have a negative impact on the exchange rate. "We will continue to face a highly volatile, highly volatile scenario," she said.
Selic Interest Rate
The market is also awaiting the decision of the Central Bank of Brazil's Monetary Policy Committee (Copom) on the benchmark Selic interest rate. The two-day regular Copom meeting began this Tuesday.
After the Federal Reserve (Fed), the central bank of the United States, announced by surprise the reduction of its interest rate to zero on Sunday (15) night to try to neutralize the negative effects of the coronavirus pandemic, the Brazilian Central Bank has been receiving pressure to take the same measure.
The effect of a Selic rate cut on the foreign exchange market would cause the dollar to appreciate further against the real. This would mean that international investors investing in fixed income in the country could withdraw their resources from Brazil to invest in countries perceived as safer. There is considerable debate among economic experts about how effective a Selic rate cut would be for the Brazilian economy at this time. The rate is currently at 4.25% per year, a historic low.
"The best option would be to not cut the exchange rate to attract foreign capital again and ease pressure on the dollar without the Central Bank having to intervene. If we cut it, the dollar at 5 reais will be the new normal," says Jefferson Laatus, chief strategist at Grupo Laatus.