Brazil’s presidential election delivered a major surprise to start the week, with right-wing challenger Bolsonaro outperforming opinion polls to finish ahead of incumbent Lula in Sunday’s first round.
BRL spiked at the open in São Paulo on Monday and continued to extend gains today, in a good early sign that the knee-jerk move hasn’t been faded overnight.
Our best dollar P/L trade so far this year came from being long BRL via funding in JPY, initiated at the end of March via Energy Is Repricing Carry. This was based more on the energy tailwind, with politics not moving the needle as much earlier this year.
This has now shifted, with politics front and centre, but this doesn’t mean BRL has fully run its course in terms of appreciation through to year-end.