Brazil’s Real Drops on Speculation about October Polls

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Brazil’s Real Drops on Speculation about October PollsBrazil’s real fell for the sixth consecutive day, its longest losing streak since August 2013, after the market keenly observed opinion polls for any signs showing President Dilma Rousseff stands a chance of winning in the October elections.

The real dropped 0.4 percent to trade at 2.3474 per U.S. dollar as of 2:04 p.m. Sao Paulo time, its lowest point on a closing basis in nearly 6 months, after earlier declining 4.2 percent last week. Swap rates, which measure changes in interest rates, plunged 0.03 percentage point, or three basis points, to 11.58 percent for the contract that matures in January 2016.

“Polls should continue to dictate trading in the currency,” Joao Paulo de Gracia Correa, a Curitiba, Brazil-based trader at Correparti Corretora de Cambio, told Bloomberg News.

A survey published by Vox Populi last week indicated that ex-Environment Minister Marina Silva may garner 42 percent of the votes in an election runoff against Rousseff’s 41 percent. The difference has a margin of error of +/- 2.2 percentage points, which means the two leading candidates are tied.

In order to curb excess volatility in the currency markets, Brazil placed currency swaps worth $197.8 for sale and rolled over contracts valued at $295.6 million. Economists surveyed by the central bank lowered their growth estimate for 2014 from 0.48 percent to 0.33 percent today.

Brazil plunged into an economic recession in the January-June half of this year, with the gross domestic product declining 0.6 percent in the second quarter after dropping 0.2 percent in the first one. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com