The dollar closed April with its fourth consecutive monthly increase.
In the first four months of the year, the dollar surged 35,51%, due to a lack of confidence in the Brazilian economy.
SAO PAULO (Reuters) - The dollar closed higher again on Thursday, boosted by external factors, but ended the week down more than 4%, at the end of a period marked by some easing of fears about Paulo Guedes's continued presence in the government and by increased currency interventions by the Central Bank.
The depreciation this week, however, only reduced the accumulated gains in April—the fourth consecutive month of increases. External support for the dollar was compounded by escalating domestic political noise, which, although lessened, is still seen as persistent.
The real ended the month with the second worst global performance (-4,48%), ahead only of the Turkish lira (-5,4%). Other emerging currencies also lost value, but to a lesser extent, such as the South African rand (-3,6%) and the Mexican peso (-1,7%).
Emerging market currencies, in general, diverged from other currencies sensitive to global risk sentiment. The Australian dollar, for example, jumped more than 6% during the period.
On April 24, the day Sergio Moro announced his departure from the government, the dollar surged to a nominal intraday record high of 5,7491 reais.
"Upward pressure is expected to continue as long as the currency remains above the highs of March and early April," said analysts at Commerzbank. The highs of early April and March are near 5,33 reais and 5,20 reais, respectively.
According to Credit Suisse, the dollar is now expected to go through a "long period of consolidation" before resuming its upward trend. Strategists at the bank cite technical indicators, such as the relative strength index being in "heavily overbought" territory and shorter-term momentum measures being "stretched."
“We see initial resistance at the current all-time high of 5,7475 reais, which may limit (further increases) for now. Subsequently, however, we expect a breakout from this limit and a resumption of the main upward trend, with the next level at the psychological barrier of 6,0000 reais,” they concluded.
The US dollar ended the session in the spot market with a gain of 1,55%, at 5,4380 reais on the sell side.
During the week, the price fell 4,06%, but still ended April with an increase of 4,69%.
In the first four months of the year, the dollar surged 35,51%.
In auctions held in April, the Central Bank settled a total of US$6,792 billion in traditional currency swaps with a start date in that month, the largest volume of the year.