MediumIV Macro Policy & Sovereign Debt2 October 2026, Friday
Brazil's real slips ahead of a neck-and-neck election
Brazil holds the first round of its presidential election on 4 October. The real weakened from 5.1006 per dollar on 22 September to 5.2176 on 1 October. The latest Quaest poll shows a 42% to 42% tie between Lula and Flávio Bolsonaro in a simulated run-off.
According to US Commodity Futures Trading Commission (CFTC) data reported by the Rio Times on 2 October, speculators' net position in real futures rose to 60,538 contracts on 29 September. That was an increase of 6,337 contracts in a week, but still 17% below the year's peak of 72,813 on 1 September. The position is worth roughly 6.1 billion reais in total. The Selic policy rate stands at 13.75%, keeping the real attractive to investors seeking a wide interest-rate differential.
The Quaest poll reported by Colombia One surveyed 2,004 voters on 24–27 September and was published on 28 September. In the first round Lula takes 39% and Flávio Bolsonaro 34%, with 5% undecided. With a margin of error of ±2 points, the run-off is a statistical toss-up. A BTG Pactual/Nexus poll, by contrast, shows Lula ahead by 46% to 44% in the run-off. If needed, the run-off will be held on 25 October.
Talay assessment
Bottom line
The real's 2.3% decline shows that the market regards the outcome as uncertain until the run-off. For now, the 13.75% Selic is preventing the speculative position from unwinding completely. The most likely path is that no candidate passes 50% in the first round and volatility persists until 25 October.
Likely effects
- Brazilian currencyNegativeWeeks
A neck-and-neck run-off keeps carry positions sensitive to election news and leaves the real volatile.
- Brazilian monetary policyNegative1–6 months
A real weakened by election uncertainty raises the risk of imported inflation. This could narrow the room for further cuts from a Selic of 13.75%.
- Emerging-market flowsUncertainWeeks
Election risk in Brazil could also shape how carry-seeking funds view other high-yield markets, including Türkiye.
Possibilities, ranked
- 1Race goes to a run-off70%
No one passes 50% in the first round, and the real swings on polling news until 25 October.
Watch: First-round results announced by the Superior Electoral Court on the night of 4 October
- 2Lula wins in the first round20%
Lula passes 50% in the first round, uncertainty lifts early and the real recovers in the near term.
Watch: A first-round result above 50% of valid votes
- 3Flávio Bolsonaro finishes ahead10%
Flávio Bolsonaro finishes the first round in the lead, and the market starts pricing a shift in fiscal policy.
Watch: The candidate ranking in first-round results and the dollar/real rate on 5 October
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Dollar/real (1 October)▼ 5.2176
- Quaest run-off▼ 42%–42%
- CFTC net real position▲ 60,538
- Selic▲ 13.75%