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Political Jitters Halt Gains in Brazilian Real


Dec. 4 2020, Updated 10:53 a.m. ET

Brazilian real: Two-day volatility

The Brazilian real exhibited a gain against the US dollar on October 6, 2015, on an advancement in crude and commodity prices globally. However, the trading session on the following day saw the Brazilian currency gain as concerns spread that President Dilma Rousseff will not be able to pass the crucial austerity measures.

The news came out the day after global crude oil prices increased 4.9% on October 6. The Brazilian real has been one of the currencies hit the worst this year. It’s been plagued by plunging commodity prices, a slowdown in China, political problems, and inflation levels that are still high.

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Court rules against Rousseff

A vote by Brazil’s National Congress on whether Rousseff’s vetoes would receive support or be reversed has been delayed. Earlier this year, Rousseff vetoed payouts with respect to pensions and an increase in salaries that was expected to increase government spending by $16 billion over a span of four years.

Brazil’s federal accounts court, the Tribunal de Contas da União (or TCU), ruled against Rousseff in her attorney general’s request to delay a ruling by auditors on the alleged manipulation of government accounts.

Impact on the market

The ETFs related to Brazil were also showing signs of positive movement on October 6 and October 7. The iShares MSCI Brazil Capped ETF (EWZ) rose 2.9%, while the iShares Latin America 40 ETF (ILF) increased 2.1%.

The Brazilian ADRs (American Depositary Receipts) were also trading positively. Petroleo Brasileiro SA Petrobras (PBR), an oil multinational, rose 9.8% over the two-day period. On the other hand, VALE (VALE) and Gerdau (GGB) rose 11.4% and 8.4%, respectively.


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