Brazil’s dollar exchange rate rose 8.36% on Oct. 26 after President Luiz Inácio Lula da Silva’s re-election, as investors weighed the fiscal outlook and watched for clues on the finance minister choice.
Reuters reported that the dollar briefly reached R$5.6059 during the session before spot trading closed at R$5.4066. Its gain against the real was 8.36% at the close and 12.35% at the intraday high, according to the detailed spot report. EconoTimes previously covered the broader Brazilian market sell-off after Lula’s re-election.
The Superior Electoral Court (TSE) said Lula won the Oct. 25 runoff with 51.79% of valid ballots, or 64,256,232 votes. Sen. Flávio Bolsonaro received 48.21%, or 59,826,041 votes. In the Oct. 4 first round, Bolsonaro received 47.03% and Lula 45.16%, reversing the order ahead of the runoff.
Reuters reported that investors had positioned for Bolsonaro’s victory partly because they expected a greater likelihood of fiscal adjustment. The result prompted a sharp market repricing, the outlet reported. Analysts cited by Reuters said markets would watch for signals about the fiscal agenda and the choice of finance minister.
An Oct. 27 FXStreet report said political uncertainty and fiscal concerns remain central to TD Securities’ currency outlook. The outlet reported that the bank expects wide near-term movement around R$5.60. FXStreet also said TD Securities sees carry and terms of trade supporting the real over the medium term.
Reuters reported that a weaker real can increase the local-currency proceeds Brazilian exporters receive for dollar-priced goods, naming sugar and coffee as examples. The fiscal agenda and finance minister choice are the next signals analysts cited by Reuters said investors will watch.
