Dollar closes above R$ 3,20 for the first time in 3 months.
The currency advanced for the fourth consecutive session, with investors seeking refuge in the safety of the dollar amid concerns about the slowing Chinese economy, a movement intensified by domestic factors.
By Bruno Federowski
SAO PAULO (Reuters) The dollar advanced for the fourth consecutive session and closed above 3,20 reais for the first time in more than three months, with investors seeking refuge in the safety of the US currency amid concerns about the slowdown in the Chinese economy, a movement intensified by domestic factors.
The dollar rose 1,61 percent to 3,2338 reais on the sell side, its highest closing level since March 27, when it stood at 3,2405 reais. Over the last four sessions, the currency has accumulated a gain of 4,45 percent. According to BM&F data, trading volume was around 700 million dollars.
Chinese stock markets have been in freefall in recent sessions, with companies scrambling to escape disaster as their shares were suspended and the country's main stock indices plummeting after regulators warned of a "sense of panic" gripping investors.
"The sharp correction in Chinese stock markets may be an indication of a broader slowdown in the Asian giant, and those countries that are likely to suffer are commodity exporters, such as Brazil," wrote trader Jefferson Luiz Rugik of the brokerage firm Correparti in Paraná, in a note to clients.
In this context, the dollar strengthened against currencies such as the Chilean and Mexican pesos. In Brazil, the movement was much more intense, with investors citing capital outflows related to corporate operations.
Furthermore, traders stated that the surge in the US dollar in recent sessions triggered a series of automatic dollar purchase operations to limit losses ("stop-loss") set up by investors following the dollar's fall last month. In June, the US currency accumulated a 2,46 percent drop against the real, after having jumped almost 20 percent this year up to the end of May.
"The market had been in a downward trend. A strong surge like this does more damage in these cases because it catches the market by surprise," said a trader at an international brokerage firm, who spoke on condition of anonymity.
Verde Asset Management highlighted in the most recent report of the Verde Fund that it sees room for the dollar to rise even further here, considering the assessment that the real has already corrected as much as it should to be mistaken.
This morning, the Central Bank sold the entire offering in the auction of currency swap rollovers, which are equivalent to the future sale of dollars. With this, it replenished a total equivalent to 1,868 billion dollars, or about 18 percent of the August batch, which corresponds to 10,675 billion dollars.