Actual ought to fluctuate in a slender vary earlier than election, ballot reveals

The dollar index hit a two-decade high on Tuesday and is expected to remain strong

The real is expected to fluctuate in a narrow range this month, influenced by the global movement of the dollar, as Brazilians prepare to vote in the October 2 presidential election, a Reuters poll showed on Wednesday.

The dollar index hit a two-decade high on Tuesday and is expected to remain strong amid expectations of continued US interest rate hikes and an outperformance of the US economy relative to its peers.

In the coming weeks, the real is expected to trade at 5.24 to the dollar, according to the survey. On Tuesday, 1 dollar was worth 5.2395 reais. But in three months, the forecast is for a rate of 5.29 reais.

“We do not foresee major fluctuations in the short term, as we believe that these will be peaceful elections. We do not see the risk of institutional crisis or violence, as happened in the United States when Biden began his term,” said Ronaldo Patah, investment director at UBS Wealth Management Brazil.

Former Brazilian President Luiz Inácio Lula da Silva (PT) has led the polls of voting intentions, with current President Jair Bolsonaro (PL) in second.

Nearly all emerging market currencies were expected to weaken or, at best, remain at their current levels over the next three months as the U.S. central bank’s tightening of monetary policy increases the dollar’s position as a safe haven asset. -safe.

But a relatively stable outlook for the Brazilian currency could change after January 2023, when the winner of the presidential election must present a new fiscal arrangement for the country, Patah added.

In one year, the forecast is for the exchange rate to be 5.20 reais to the dollar, according to the median of the estimates of 28 exchange strategists interviewed from September 1 to 6.

Reflecting nervousness about the future of the real, seven of 14 respondents who responded to a separate question about currency risks said they were inclined to expect further weakness. Five saw upside risks and two considered them balanced.

“The Central Bank of Brazil appears to have ended the monetary tightening, so further interest rate hikes by the Fed will more quickly close the gap and, in the short term, could start to affect foreign currency flows,” noted Mauricio Nakahodo, economist. MUFG senior.

Analysts expect further US interest rate hikes, reaching a range of 3.25% to 3.50% by the end of this year, one percentage point above the current rate.

The Mexican peso, meanwhile, is expected to lose strength, with the exchange rate moving to 20.85 pesos to the US dollar in one year, despite analysts persistently raising inflation forecasts and reinforcing bets that policymakers will continue to raise the central bank interest rate.

The peso gained more than 2% against the dollar this year, while the real rose more than 6% against the US currency.

Source: Reuters