Brazil’s Real Surges after Neves Gains Ground against Rousseff

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Brazil’s Real Surges after Neves Gains Ground against RousseffThe Brazilian real jumped after an opinion poll indicated that Senator Aecio Neves stands a chance of trouncing President Dilma Rousseff in this month’s election runoff.

The real rose 1.4 percent to trade at 2.3951 per U.S. dollar as of 9:43 a.m. Sao Paulo time. Swap rates, which measure projections of changes in the nation’s interest rates, fell 0.04 percentage point, or four basis points, to 11.93 percent on Monday for the contract that matures in January 2016. The real also surged after Marina Silva, who was third-placed in the first round of the presidential polls, endorsed Neves on Sunday.

“The political debate tends to remain the main driver for currency trading,” Deives Ribeiro, a Sao Paulo-based foreign-exchange manager at Fair Corretora de Cambio e Valores, told Bloomberg News. “Investors liked to see Neves ahead of Rousseff.”

The real’s one-month implied volatility, which measures the expected swings in the exchange rate used to set price to options, rose to 24 percent, the most in emerging economies.

The Sensus opinion poll, which was published in IstoE magazine’s website, showed that Neves would garner 52.4 percent of the total votes cast in the runoff against Rousseff’s 36.7 percent. The Oct. 7-10 survey involved 2,000 respondents, and has a margin of error of +/-2.2 percentage points.

Meanwhile, the ruble dropped as tensions in Ukraine continued. The Russia’s currency dropped 0.2 percent to trade at 40.435 per dollar as of 6 p.m. Moscow time. The ruble has dropped 11 percent since the final days of February 2014, just before Russia invaded Ukraine’s Crimea peninsula.

The yield on the ruble-denominated bonds that mature in February 2027 plunged three basis points, or 0.03 percentage point, to 9.81 percent. 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