[ad_1]
The speculator is your friend, he is society’s friend. Yes, you read that right. Overcorrection? Sure, but not much.
When for some reason Brazilians and foreigners become too optimistic about Brazil and our currency starts to appreciate “more than it should”, speculators sell the real on the market and prevent a stronger appreciation of the currency. exchangewhich is unhealthy for the economy. The reverse is also true: when a forex trader realizes that people are overly pessimistic about the future of the economy, and that this pessimism will cause the real to depreciate sharply, he will buy the real and Sell USD. Thus, the heat on our currency exchange rate cools down. Thus, the person working in the foreign exchange department of a bank acts as a brake on currency fluctuations that have no basis in solid economic fundamentals. Not because he cares about the country’s economy, but because of his own interest in making money (like a baker, a farmer, everyone).
It’s all about keeping the ball in the ground and ditching the conspiracy theories that usually abound. The national currency is caught in a market circle. It’s not that the market always gets the direction of asset prices right—far from it—but it tries, oh, it tries. trader They come from successes, not from mistakes! ).
As we have said many times, it is very dangerous to make predictions about the future of exchange rates. There is a huge uncertainty, thousands of unpredictable events that will affect prices – and that is annoying. That said, some educated guesses can be made about recent movements (yes, hindsight analysis). We believe that the strong depreciation is a reflection of internal rather than international factors. Not so long ago, concerns about global inflation were actually a very relevant factor, as the prospect of higher interest rates in Europe and the United States put pressure on the exchange rate (money prefers to go there, a safe place, when returns are less reasonable). But this attraction to the North loses its importance in 2024 compared to 2023. In January 2023, Dollar The index is close to 5.40, but it closed the year below 4.90. It looks promising. But the current price on the market to buy the North American currency is more than 5.6 reais. That is almost a 15% increase compared to the real price.
Over the same period, the Chilean peso has remained relatively stable against the dollar, and the Colombian currency has fallen just 4%. In other words, the data seems to suggest that the problem is more our own than global.
It is difficult to assign weights, but a host of causal factors would need to include: (i) the infantile political war between Planalto and the central bank; (ii) the staggering fiscal deficit, which is expected to exceed 7% by the end of 2024; (iii) the resilience of inflation expectations; and finally, (iv) the fear that a future central bank will be subservient to President Lula (low interest rates mean capital outflows and exchange rate depreciation).
It’s a human trait to blame our problems elsewhere. Yet, most of the time, our stumbling blocks are of our own making. But to understand that, you need humility — or consultants and columnists won’t want to keep sucking up to the boss.
Link exists: Did you enjoy this text? Subscribers can access it seven times a day for free via any link. Just click on the blue F below.
[ad_2]
Source link
