Brazil’s Real Drops on Increased Support for Rousseff

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Brazil’s Real Drops on Increased Support for RousseffThe Brazil’s real declined the most this year after an opinion poll indicated that President Dilma Rousseff had gained more support for her reelection bid despite sluggish economic conditions.

The real dropped 1.1 percent to trade at 2.3242 per U.S. dollar as of 11:31 a.m. Sao Paulo, bringing its total decline this week to 3.5 percent. This was the biggest drop since August 2013. The Ibovespa stock index fell 1.5 percent to 57,499.70, resulting in a cumulative decline of 5.2 percent this week.

“Markets don’t like to see Rousseff gaining support,” Reginaldo Galhardo, a Sao Paulo-based foreign-exchange manager at Treviso Corretora de Cambio, told Bloomberg News. “The plunge in the value of the currency and the Ibovespa is a direct reflection of that.”

An Ibope opinion poll indicated that Marina Silva, the main opposition candidate, will garner 43 percent of the total votes cast in a runoff, compared with Rousseff’s 42 percent.  A survey done last week indicated that Silva was leading by seven percentage points.

To boost the real and curb import price surges, Brazil offloaded $197.7 million worth of currency swaps on Friday.

Recently, Moody’s Investors Service lowered Brazil’s sovereign debt rating on Sept. 9, citing weak economic growth and fiscal problems under Rousseff’s administration. A separate report published on Aug. 29 by the national statistics institute showed that gross domestic product fell 0.6 percent in the April-June quarter. This compares with a decline of 0.2 percent in the first quarter of 2014, which indicates the economy slid into recession. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com