Brazil’s real recovered some ground, strengthening to around BRL 5.36 per USD after weakening to as low as BRL 5.60 per USD, near its weakest level since mid-2025, immediately following President Lula’s runoff victory over Flávio Bolsonaro. On October 26, the first trading day after the election, the USD closed at BRL 5.40, up 8.21%, amid market turmoil. Markets are focused on fiscal policy, particularly the government’s commitment to controlling spending and public debt, which has risen significantly in recent years. The appointment of the next finance minister will be a key signal. Markets had viewed a Bolsonaro administration as more likely to curb public spending, seen as essential to lowering interest rates. Brazilian assets had rallied after the first round, when Bolsonaro finished ahead of Lula and outperformed polling expectations.

Brazil’s real trimmed losses to around 5.40 per US dollar in late October after weakening to as low as 5.60, near its lowest level since mid-2025, as markets reacted to President Lula’s runoff victory over Flávio Bolsonaro. The selloff reversed gains following the first round, when Bolsonaro outperformed polls and finished ahead of Lula. Investors had viewed a Bolsonaro administration as more likely to curb public spending, seen as a key factor in lowering interest rates. Markets are now reassessing fiscal risks, including persistent primary deficits and rising public debt, alongside institutional uncertainty surrounding the election. Bolsonaro has reportedly refused to concede and challenged the result in court, although Brazil’s Superior Electoral Court has confirmed the outcome.

Brazil’s real weakened sharply against the US dollar, falling to as low as 5.60 per dollar, near its weakest level since mid-2025, as President Luiz Inácio Lula da Silva’s surprise re-election victory heightened concerns over the country’s fiscal outlook. Lula defeated right-wing Senator Flávio Bolsonaro, son of jailed former president Jair Bolsonaro, winning 51.8% of the vote against Bolsonaro’s 48.2%. Bolsonaro had been favored to win after narrowly leading the first round on October 4, campaigning on tighter fiscal policy and lower corporate taxes. The bitterly contested campaign underscored Brazil’s deep political divisions, leaving Lula facing his toughest political landscape since first taking office in 2003, with a polarized electorate and the most right-wing Congress in the country’s democratic era. Meanwhile, Bolsonaro has reportedly refused to concede and is challenging the results in court, although the Superior Electoral Court has confirmed the outcome.