In the News

EMERGING MARKETS – Brazil’s real slumps 1% as presidential campaigns begin

NEW YORK, August 16 (Reuters) - Brazil's real slumped 1% on Tuesday, with investors eyeing the start of presidential election campaigns, while other Latin American currencies also slipped on rising recession worries.

  • Brazil’s Lula has 12% lead over Bolsonaro – poll
  • Brazil 2022 trade surplus outlook dims
  • Colombia economy grew 12.6% in Q2, beating estimates

A poll on Monday showed leftist Luiz Inacio Lula da Silva has a 12-percentage-point lead over far-right incumbent President Jair Bolsonaro ahead of the October election.

“As Colombia, Chile, Peru also align with left-of-the-center politics, the return of Lula has more excitement under its wings,” said Juan Perez, senior FX trader & strategist at Monex USA.

There would be a push towards more serious and intertwined economic cooperation, Perez said. Analysts have warned of significant volatility in the real as the campaigns progress.

“It’ll be a wild ride. Their campaigns are vastly different and Lula does have a past that may haunt BRL, so if he leads, expect USD pressure over BRL. “The more leftist candidate in Latin campaigns tend to scare global western-driven markets that do not seek a reform or shift towards more regional integration and less so with the globalized financial and commercial system.”

During the 2018 presidential election, the real had fallen 7.4% in August, inched up in September and jumped 8.8% in October, when Bolsonaro won on a promise to simplify and reduce taxes, create jobs, clean up politics, shrink the state and crack down on crime.

Other Latam currencies also fell against a dollar that steadied after hitting its highest in three weeks. Weak retail sales and factory activity from China this week raised worries about economic recovery in the world’s second largest economy, prompting a rate cut by China’s central bank.

“In general the buck has returned to dominance because the news out of China has been bad for way too long to the point where it is really threatening the interconnectedness of the globalized system,” said Perez.

Mexico’s peso eased from two-month highs, down 0.3%. Falling oil prices knocked crude exporter Colombia’s peso 2% as it caught-up after a long weekend. Colombia’s economy grew 12.6% in the second quarter, the government statistics agency said, exceeding market expectations of 11.25%.

Brazil’s trade surplus this year is likely to fall short of prior forecasts, according to private economists and an Economy Ministry official. Brazil’s Bovespa, meanwhile, was little changed, while Mexican shares hovered near two-month peaks.

Reporting by Susan Mathew and Anisha Sircar in Bengaluru; Editing by Marguerita Choy and Alex Richardson
Let’s Talk
Ready to save money, save time, and reduce risk?

It’s quick and easy to get started. Fill out the form below and a Monex USA market expert will connect with you shortly. Our team will work closely with you to develop a personalized strategy for your global payment & currency needs.

Contact us