Dollar jumps 8 percent: after Lula's win, Brazil's travellers and savers redo their sums

What happened

On Monday, 26 October, the dollar closed at 5.40 reais – up 8.21 percent and, according to Guia do Investidor, the biggest one-day rise since January 1999. In the morning it briefly cost more than 5.60 reais. The B3 exchange halted trading for 30 minutes shortly after the open, the first such halt since March 2020; the benchmark Ibovespa closed 13.88 percent lower at 176,608 points.

Many investors had bet on a victory for Flávio Bolsonaro and on tighter spending. Lula, however, won the runoff with 51.79 percent of valid votes. According to InfoMoney, investors fear the budget gap will persist and that a critical Congress will make governing harder. The National Treasury cancelled bond auctions planned for this week and bought back government paper to calm interest rates.

Finance Minister Dario Durigan said the government intends to change the law or the constitution this year to hit its fiscal target more precisely.

The mood on the ground

For travellers the shock arrived right at the counter: at exchange bureaus in São Paulo and Rio de Janeiro the tourist dollar cost between 5.77 and 5.89 reais on Monday and the euro more than 6.50 reais – roughly 7 to 10 percent more than on Friday, Brasil em Folhas reported. An exchange-bureau employee in Rio called the difference "enormous" and advised buying currency only in instalments for now.

In the tourism industry the concern is less the level of the rate than the back-and-forth. An economist at the FecomercioSP trade federation told the trade portal Panrotas that constant swings dampen demand as much as a high rate, because families can no longer plan their travel costs and tend to postpone holidays. Jet fuel, diesel and petrol could also become more expensive – and with them flights, bus trips and rental cars.

On the stock market, banks and retailers were hit hardest, while exporters such as Suzano and Vale gained because they earn in dollars. An asset manager told InfoMoney that the government's continuation alone does not cause a lasting crash – the next budget decisions will be decisive.

Voices from the media