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Financial News: BRAZIL: Rising USD Influences The Stock Market

BRAZIL: Rising USD Influences The Stock Market

06/06/2018 - 19:37:00 (RTTNews)

(RTTNews) - Ibovespa, the benchmark stock index in Brazil, fell 0.68% to 76,117.22 points Wednesday, on a day that the locally traded U.S. dollar rose 0.7%, reaching R$ 3.8390, attracting investors of the stock index.

The domestic political uncertainty weighed negatively on the stock exchange, and the decline was not only sharper because Vale's shares - with a greater weight in the index - rose 4.07%.

"Two components worsen the Brazilian stock market, one is external, there is a strong strengthening of the dollar, a higher level of risk aversion. On the local side, Petrobras weighs, but the change in the central bank's intervention in the exchange rate was also not good. The dollar is still high despite the interventions, and it will fetch the R$ 4," said Levante Investimentos stock specialist Eduardo Guimaries.

For the third consecutive session, the locally traded U.S. dollar closed higher (+0.70%), trading at R$ 3.8390, renewing the maximum since March 2, 2016, when the foreign currency closed the session quoted at R$ 3.8890.

The movement was taken off the outside, where the currencies of emerging countries appreciated against the U.S. dollar. The market's concern with the country's fiscal situation and with the domestic political scene is gaining strength.

For the chief economist of Codepe Corretora, Jose Costa, the rise in U.S. interest rates and Brazilian rates also negatively influenced the Ibovespa.

"The European Central Bank has signaled that it can stop the quantitative easing at the next meeting. Here, the future interest rate is rising sharply, the market does not predict that interest will stay at 6.5% here," he said.

Analysts point out that the uncertainties with the Brazilian political scenario bother the investor, who prefers to take a more cautious stance - since the foreign market is not calm either.

In the business field, the dollar's rally has led export companies - such as Vale - to end higher. The highest increase of the day was Suzano, 7.55%, followed by Bradespar, 6.07%, and Embraer 4.03%.

"Exporting companies are worshiping the high dollar," Costa said.

Analysts expect more external pressure on the Ibovespa on Thursday.

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