Dollar closes higher on expectations for higher interest rates; Ibovespa falls

Exchange ends the week with an advance of 1.12%, quoted at R$ 5.12; Stock market takes time off after valuation sequence and drops to 129 thousand points

Brazil Archive/AgencyDollar trades again above R$ 5.10 with expectations of higher Brazilian interest rates

The main indicators of financial market Brazilians closed the week in the negative field with the expectation of a new interest rate hike next Wednesday, 16th, after the inflation April come stronger than projected. Price variation is also an issue in international markets, which react less recklessly to the second higher-than-expected increase in US inflation. O dollar closed the day with an increase of 1.12%, quoted at R$ 5.123, after reaching a maximum of R$ 5.139 and a low of R$ 5.054. The US currency ended the week with a high of 1.74%, while in the preview of the month, the exchange rate dropped 1.93%. Since the beginning of the year, the dollar has retreated 1.25%. O Ibovespa, a reference on the Brazilian Stock Exchange, gave a break in earnings and ended Friday with a drop of 0.49%, to 129,441 points. The main indicator of B3 accumulates a drop of 0.52% in the week and an increase of 2.55% in the preview of June. In 2021, the Ibovespa accumulated an increase of 8.37%.

Investors’ attention turns to meeting the Monetary Policy Committee (Copom) do Banco Central (BC) between next Tuesday and Wednesday. The collegiate must announce the increase of 0.75 percentage point in the Selic, throwing the basic interest rate of the Brazilian economy to 4.25%. The increase of 0.83% in inflation in April – with a sum of 8.06% in the last 12 months -, however, may cause this movement to be greater than expected. Sources consulted by BC already see the Extended Consumer Price Index (IPCA), the official inflation gauge, at 5.44%, above the ceiling of the target pursued by the monetary authority, of 5.25%.

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Still in the domestic scenario, service provision rose 0.7% in April, but is still 1.5% below the pre-pandemic level in February 2020. The increase also only removes part of the 3.1% drop recorded in March amid the return of social isolation measures. In the year, the sector grew 3.7%. In 12 months, however, the volume of services still registers a drop of 5.4%, compared to a decrease of 8% observed in March. In comparison with April last year, the segment advanced 19.8%, the second consecutive positive rate and the most intense in the historical series, which began in January 2012.

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