Although stocks are not likely to be affected by yesterday’s election, the Brazilian real is likely to continue appreciating ahead of what will now be a second round of voting.
Catching some observers by surprise, presidential candidate Dilma Rousseff, the former chief of staff to President Luiz Inácio Lula da Silva, received 46.9 percent of total votes cast in national elections on Sunday—just shy of the 50 percent needed to avoid a runoff election against former São Paulo Governor José Serra. Mr. Serra won 32.6 percent of the votes, followed by Green Party candidate Marina Silva, who captured 19.3 percent.
Going into the election, the Brazilian real, traded at about 1.68 per dollar, its highest level since the September 2008 financial crisis in the United States. This is a clear change from most past elections that have been preceded by market jitters.
With the presidential decision now on hold until a second round on October 31, the government is unlikely to make any moves that could affect the exchange rate. “In the near term, the Brazilian real is likely to continue to strengthen as the government will put off any announcements of policies to help weaken the currency,” said Doug Smith of Standard Chartered Bank.
Stay tuned for more election coverage from AQ Blogger, Paulo Rogerio.
(Homepage photo by Roberto Stuckert Filho.)