U.S. Elections Cause Volatility in Brazil Currency

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The volatility of the U.S. dollar is not only affecting American residents, but also Brazilians and expats who plan to travel abroad during the end-of-year holidays. With the U.S. Presidential elections less than a week away, those in Brazil who have already purchased airline tickets and hotel packages, wonder if they should exchange Brazilian reais for U.S. dollars now or wait.

Brazilian Silvia Neves, who plans on traveling overseas, told The Rio Times, “I wonder if I should not purchase U.S. dollars now, while [Donald] Trump is gaining on Hillary [Clinton] and the dollar is falling (against the Brazilian real).” She added, “If she [Clinton] wins the dollar will surely appreciate again.”

For Neves and hundreds of Brazilians planning on traveling abroad in December and January, the outcome of the U.S. election has never been so important. Since news that Trump is gaining in key, undecided states, the U.S. dollar has depreciated in relation to the Brazilian currency and travelers are wondering if it will depreciate even further in the coming days.

At 9:15 AM on Thursday, November 3rd, foreign exchange markets in Brazil already showed a depreciation of 0.38 percent by the U.S. dollar from the November 1st closing, quoted at R$3.224/US$1. November 2nd was a national holiday and financial markets were closed in Brazil.

By 11:40 AM, the depreciation had dropped to 0.06 percent, with the North American currency being quoted at R$3.2394/US$1, as two new polls showed Clinton once again with a slight advantage over her Republican opponent. According to economic analysts, the volatility is expected to continue until at least Tuesday, November 8th, the U.S. Election Day.

Due to the uncertainties on the foreign front, the Central Bank (BC) announced a reverse currency swap auction of up to 5,000 contracts to limit the depreciation of the U.S. currency. Since January 1st, the U.S. currency registered a devaluation of 17.9 percent in relation to the Brazilian real.