POLL-Brazil's currency to remain strong despite brewing political doubts

By Gabriel Burin

BUENOS AIRES, Nov 6 (Reuters) - Brazil's real BRL= will likely remain strong in the short term despite market doubts over the developing scenario toward next year's presidential vote, a Reuters poll of foreign exchange strategists showed.

The currency has continued to appreciate in recent months thanks to high local interest rates as well as government initiatives to keep public finances in check amid investor anxiety over U.S. tariffs.

It should stay supported by continued "carry trade" bets to profit from Brazil's steep rates combined with views of persistent U.S. dollar softness ahead.

"Valuation, carry, and a weak USD should support BRL despite modest fiscal and political noise," BofA analysts wrote in a report.

In three months the real is expected to trade at 5.36 per U.S. dollar, according to the median estimate of 31 foreign exchange strategists polled November 3-5, where it closed on Tuesday.

For the 12-month period ending October 30, 2026, following the first and potential second round votes in a presidential election on October 4 and 25 respectively, the currency is seen at 5.48 or a 2.2% drop from Tuesday.

Answers to an extra question on risks to forecasts over the coming year reflected some pessimism. Of 14 respondents, eight saw a weaker bias for the real, four had a neutral view and only two a stronger outlook.

It was the weakest balance of risks since the start of February, when the real was only starting to rebound from a sharp drop at the end of 2024.

President Luiz Inacio Lula da Silva brought the October 2026 election to the fore last month by confirming his plans to seek another term.

"The outlook is less certain with Lula remaining competitive for next year and no clarity in the opposition camp just yet," said Alejandro Cuadrado, global head of FX and Latam Strategy at BBVA, the most accurate forecaster in Reuters Latam polls last year.

Year-to-date, the real is up 15% against the dollar, while the Mexican peso MXN= has gained 12% and the Argentine peso ARS= lost 29%.

In 12 months Mexico's currency is expected to depreciate 3.2% to 19.20 per dollar. Argentina's currency is forecast to fall 12.7% to 1,660 per dollar.

The Argentine peso has been generally stable after last month's legislative vote and in line with consensus estimates in Reuters Latin America foreign exchange polls, confounding devaluation predictions that had underestimated local views.

(Other stories from the November Reuters foreign exchange poll)