Brazil’s Real Falls to Five-Year Low on Election Jitters

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Brazil’s Real Falls to Five-Year Low on Election JittersBrazil’s real touched its lowest level in five years on speculation that economic growth may be sluggish after a recent voter survey indicated that President Dilma Rousseff could win her re-election bid.

The real fell 0.3 percent to trade at 2.4549 per U.S. dollar as of 10.03 a.m. Sao Paulo time, its weakest level since December 2008. The real has plunged 9.5 percent in the quarter through September, making it the second-worst performing currency from emerging market after the Russian ruble.

“The market is gradually pricing a victory for Rousseff, and the real is clearly reflecting that,” Camila Abdelmalack, a Sao Paulo-based economist at CM Capital Markets, told Bloomberg News. “We shouldn’t see a reversal of that trend before the end of the elections.”

Rousseff is leading in the polls and may prevail against her closest rival, former Environment Minister, Marina Silva. A Datafolha opinion poll published at the close of markets on Tuesday showed that Rousseff would garner 49 percent of the total votes cast compared with 41 percent for Silva in an Oct. 26 runoff. The survey, which was done on Sept. 29-30, has a margin of error of +/- 2 percentage points.

Brazil auctioned swaps valued at $197 million as it sought to limit import-price increases and boost the currency.

Swap rates, which measure expectations for changes in interest rates, jumped 0.04 percentage point, or four basis points, to 11.99 percent on Wednesday for the contract that matures on January 2016.

The real recently got a boost from speculation that a new administration may undo Rousseff’s policies that have been blamed for skyrocketing inflation and weak economic growth. 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