Brazilian Real Faces Lower Election Volatility as 3-Month Implied FX Swings Hold Near 15%
Updated
Updated · Valor International · Aug 18
Brazilian Real Faces Lower Election Volatility as 3-Month Implied FX Swings Hold Near 15%
1 articles · Updated · Valor International · Aug 18
Summary
Three-month implied volatility for the real is a little above 15%, well below 26% in 2018 and 23% in 2022, signaling a calmer election period than in Brazil’s last two presidential races.
Traders attribute that to two forces: subdued global foreign-exchange volatility and a more predictable presidential field, with the main runoff candidates already largely known to markets.
The market still expects sharp post-vote reactions. Santander said forward implied volatility around the first and second rounds is comparable to past elections, even if broader three-month pricing looks contained.
Recent trading showed the real remains vulnerable to political headlines: the dollar jumped more than 1% at Friday’s peak, while foreign investors bought nearly $2 billion in derivatives, according to traders citing B3 data.
Goldman Sachs said fiscal clarity will still drive the currency after the vote, raising its three-month dollar forecast to R$5.20 from R$4.90 and its six-month view to R$5.10.