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The Brazilian real is expected to weaken against the U.S. dollar over the coming months owing to domestic political uncertainties, with the USD/BRL seen rising to 4.30 by the end of this year, according to the latest research report from Commerzbank.
In Brazil’s Presidential elections right-wing Jair Bolsonaro stands a good chance of winning the run-off on October 28. According to the latest polls he will obtain more than 50 percent of the vote and is thus 15 percentage points ahead of his rival Fernando Haddad of the Worker’s Party.
From the point of view of the financial markets this is good news as in a choice between Haddad and Bolsonaro, Bolsonaro seems the lesser evil in view of the ailing national finances.
After the elections it will have to be seen what exactly Bolsonaro is planning to do and to what extent his economic advisor Paulo Guedes, on whom the hopes of the financial markets for a reform-orientated policy approach rest, will actually be able to influence Bolsonaro’s approach, the report added.
