US dollar slips 0.08% to R$ 5.2158 ahead of Brazil vote

The US dollar ended virtually stable against the Brazilian real on Friday, October 2, dropping 0.08% to close at R$ 5.2158 in the spot market after morning volatility. The November futures contract dropped 0.50% to R$ 5.2340. At the same time, the DXY index, which tracks the dollar against six major currencies, fell 0.18% to 101.911 points.

Weakness in US non-farm payroll data softened the US dollar globally, though caution ahead of Sunday's first-round presidential vote in Brazil restrained the real relative to other emerging-market peers. Across the full week, the real nonetheless outperformed currencies such as the Mexican peso and the South African rand.

Market focus centered on the race between President Luiz Inácio Lula da Silva and Senator Flávio Bolsonaro. Alvaro Vivanco, strategist at Wells Fargo, stated in a client note that a quick move toward R$ 5.30 would represent an attractive entry point to buy the real, while a Bolsonaro victory could push the dollar down to R$ 4.75 in an initial rally.

Strategists at BBVA noted that an election lead of less than 2 percentage points for Lula in the first round could support the real, whereas a wider lead could push the dollar back toward R$ 5.30, adding that a runoff election appears inevitable.