The Brazilian real strengthened 1.00% against the U.S. dollar on Friday, closing at R$5.1417, as external currency dynamics and domestic election uncertainty shaped market sentiment ahead of October's presidential vote.
The dollar's future contract for September on the B3 exchange fell 1.05% to R$5.1515 by 17:40, capping a weekly decline of 1.53% for the greenback against the real. The Dollar Index (DXY), which tracks the U.S. currency against six major peers, edged up 0.07% to 98.856, reflecting broader dollar strength despite the real's gains.
External factors contributed to the real's advance, with the dollar trading near three-month lows internationally. Concerns over the U.S. Treasury's plan to expand long-term bond repurchases weighed on the greenback, while the euro and British pound reached multi-month highs against the dollar. The euro hit its strongest level since mid-May, and the pound surged to its highest since February 11.
Domestically, the electoral landscape added momentum to the real's appreciation. Investors closely monitored a Datafolha presidential voting intention poll released Friday evening, as well as a BTG/Nexus survey published earlier in the week. Market participants remain sensitive to fiscal risks tied to the election outcome, according to Bruno Perri, chief economist and founder of Forum Investimentos.
"The market remains quite sensitive to the fiscal situation, which is a direct derivative of the electoral outcome," Perri said. The tighter presidential race, with a smaller gap between leading candidates, was viewed favorably by investors who perceive higher fiscal risk in a potential second term for President Luiz Inácio Lula da Silva.
Senator Flávio Bolsonaro, a prominent figure in the opposition, also remains a key focus as the campaign intensifies. The real's weekly decline of 1.53% against the dollar underscores the currency's volatility amid shifting domestic and global conditions.
