US dollar slips against Brazilian real

On 10 September the spot US dollar fell 0.18% to end at 5.1026 Brazilian reais, after touching a session low of 5.0826 reais and a high of 5.1457 reais. The commercial euro also declined, shedding 0.38% to trade at 5.9240 reais. Near the market close, the DXY index rose 0.26% to 99.070 points, contrasting with the real's relative strength.

The Brazilian real posted the third best performance among the 33 most liquid currencies tracked by Valor, trailing only the Russian ruble and the Colombian peso. The currency reversed morning losses sparked by higher global risk aversion and oil futures trading above $105 per barrel. Market participants linked the midday rebound to private election tracking polls showing improved momentum for Senator Flávio Bolsonaro, which reduced the domestic risk premium.

Options markets reflected heightened political uncertainty. One-month and two-month implied volatility rose to near 19%, up from roughly 15.5% a week earlier. Alvaro Vivanco, macro strategist for emerging markets at Wells Fargo, noted that the bank models fair value for the real at 5.00 per dollar, projecting a move toward 4.75 reais under a Bolsonaro win or 5.30 reais under a status quo outcome with Luiz Inácio Lula da Silva. Meanwhile, Citi analysts noted market-implied rates point to a pause in central bank rate cuts by early 2027 and a rising probability of subsequent Selic hikes.

The Central Bank of Brazil also intervened in the foreign exchange market via a simultaneous spot sale and reverse swap operation, injecting $1 billion into the spot market. This move compressed the spread on the forward-spot differential from above 1.5% to approximately 1.3%.