Geopolitics and the Dollar: Oil pressure on exchange rates and Brazilian fiscal risk

The current exchange rate volatility, with the dollar at R$ 5.20, reflects a moment of global stress where geopolitical risks in the Middle East overshadow Brazilian domestic dynamics. The threat of escalation in the Strait of Hormuz has pushed Brent crude to US$ 91.64, raising energy costs and imported inflation for emerging markets. This adds to a 2.23% rise in the dollar over the last seven days, signaling risk aversion that affects capital flows to Brazil. With the 12-month IPCA at 4.44%, the Central Bank maintains the Selic rate at 14.00% per annum, yet this serves as a limited anchor against external oil shocks. Investors should note that the 3.00% rise in the dollar in August reflects a combination of fiscal uncertainty—exacerbated by debates like the '6x1 scale' amendment—and global commodity instability. The analysis suggests that the real risk is persistent cost-push inflation eroding purchasing power. With high interest rates stifling credit and economic expansion, the outlook for the next 30 days remains volatile, with the dollar expected to fluctuate between R$ 5.15 and R$ 5.30. Investors are advised to maintain discipline, prioritize liquidity, and avoid excessive leverage amidst this period of global monetary tightening.