The Real Votes Early

BRL’s new Bolsonaro premium.

A sharp move lower in BRL/JPY yesterday can be put down to concerns around presidential hopeful Flávio Bolsonaro being linked to Daniel Vorcaro, the jailed former Banco Master CEO at the centre of a major fraud investigation.

Clearly, this isn’t just about political fraud, but rather the knock it provides for Bolsonaro in terms of credibility in his bid to oust President Lula come October.

The severity of the move surprised us, as we hadn’t anticipated such strong favouritism this early in the campaign towards Bolsonaro over Lula. This causes us to rethink our BRL/JPY long, even with the continued constructive macro backdrop, and take partial profit.