Risk Appetite Fuels Ibovespa Surge as Dollar Hits Monthly Low


The Ibovespa, Brazil’s main stock market index, experienced a rise as the value of the US dollar fell to its lowest level of the month. The dollar decreased by 1.02% against the Brazilian real, reaching R$ 5,0367 per dollar. Meanwhile, the B3’s main cyclical index finished up by 0.67%, closing at 116.534 points.

This decrease in the value of the dollar was reflective of the recent surge in commodity prices, despite rising tensions in the Middle East. Moreover, it followed a worldwide trend of increased appetite for risk among investors. This positive sentiment in the market propelled the benchmark index, Ibovespa, to reach an all-time high on the B3 exchange.

This optimistic scenario aligns with the updated inflation forecasts provided in the most recent issue of Boletim Focus. The annual report from the Brazilian Central Bank collected forecasts from economists within the financial sector. For the first time, these projections indicate that the country’s consumer price index will end 2023 within the target range set by the government.

By the end of the trading day, the dollar fell by 1.02%, resulting in a valuation of R$5,0367. The highest value reached during the day was R$5,033.75.

Last Friday, the US dollar had finished the day with a 0.78% increase, selling for R$5,0885. As a result of the events that transpired on Tuesday, the currency experienced a weekly decline of 1.02%, a monthly increase of 0.20%, and an annual decrease of 4.57%.

In relation to the stock market, the Ibovespa index closed the day at 116.534 points, experiencing a 0.67% increase. This was a significant improvement compared to the previous Friday’s closing of 115.754 points. Hence, there was a weekly growth of 0.67%, a monthly increase of 0.03%, and an annual surge of 6.20%.

The updated inflation projections provided in the report indicated that the metric is expected to close 2023 at 4.75%, which is above the government’s target. The revisions were made in response to data from Brazil’s National Institute of Statistics and Geography, revealing that the increase in September’s Broad Consumer Price Index (IPCA) was lower than expected at 0.26% month-over-month.

For the year 2024, the predicted inflation rate remains unchanged at 3.88%. The inflation target for the following year is 3%, with a successful range of 1% to 4%.

Controlled inflation is beneficial for the economy as it allows the Brazilian Central Bank (BC) to reduce the basic interest rate, or Selic. Following two consecutive reductions of 0.50 percentage points, the rate currently stands at 12.75% per year.

Recent remarks from BC’s Director of Relationships, Citizenship, and Conduct Oversight, Maurico Moura, have garnered attention. He reiterated the signaling of a 0.50 percentage point cut in upcoming monetary policy meetings and stated that the institution will continue to lower the Selic rate as long as there is room to do so.

Investors abroad are eagerly awaiting the release of new economic data and corporate results this week. Furthermore, the upcoming remarks from Federal Reserve (Fed) President Jerome Powell are of particular interest. The Federal Reserve Bank is expected to provide fresh insights into the future of US monetary policy. The current standard tax rate in the US falls between 5.25% and 5.50% per year.

Lastly, the conflict between Israel and Hamas remains a prominent issue globally. With the conflict continuing for its tenth day, countless lives have been lost and injured. Other countries and authorities are engaged in high-stakes diplomatic efforts to prevent the war from spreading to other parts of the region. The economic impact of the conflict is particularly concerning in relation to oil, as the Middle East is a major producer and exporter of this vital resource.