by Fabricio de Castro

SAO PAULO (Reuters) – The stalemate surrounding negotiations over the U.S. debt ceiling, which could push the world’s largest economy into “default”, prompted investors to seek protection for the dollar on Thursday, which opened the door for the US currency to close with a sharp rise against the real in Brazil, above 5 reais.

The Spot Dollar closed the day at 5.0349 reais selling, up 1.65%. This is the first time the US currency has ended a session above 5 reais since May 8, when it ended at 5.0150 reais.

On the B3, at 5:18 p.m. (Brasília time), the first dollar futures contract rose 1.49%, to 5.0400 reais.

The impasse surrounding the negotiation of the increase in the ceiling of the American debt caused an early turn of affairs and pushed up the dollar, considered a safe haven by investors, against currencies such as the real, the Australian dollar and the Canadian dollar.

“The negotiation (between the White House and the Republicans) is not advancing, it is not advancing, and the day will come. All of this contributes to the appreciation of the dollar”, underlined Jefferson Rugik, director of Correparti Corretora.

Earlier in the afternoon, Reuters reported that US President Joe Biden and top Republican lawmaker Kevin McCarthy are closing in on a debt ceiling deal, with splits on just $70 billion in discretionary powers. , according to a person familiar with the talks.

Even so, the dollar remained accelerating, both abroad and in Brazil.

Brazilian professionals also said that in the previous days, due to the optimism aroused by the approval of the new fiscal framework, the dollar fell significantly, amid the dismantling of long positions (in the sense of the rise of the currency American). Thursday was the opposite movement, with a repositioning of positions.

“There are people there who, with this frame approval story, have dismantled defensive positions. And now they are rebuilding the defensive position in view of the outside,” Rugik said.

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At 5:18 p.m. (Brasilia time), the dollar index – which measures the performance of the US currency against a basket of six currencies – rose 0.40% to 104.250.

In Brazil, in the morning, the Central Bank sold all 16,000 traditional FX swap contracts offered as part of the July rollover.

(Edited by André Romani)