Brazilian Real: Politics weighs but carry supports – ING

FXStreetAug 12, 2026 8:27 AM

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ING’s Chris Turner reports the Brazilian Real (BRL) underperformed in an otherwise supportive carry environment after a bank downgraded Brazilian equities and a new poll showed President Lula widening his lead ahead of October elections. He sees this as the first real political hit to BRL but expects high implied yields and Brazil’s net energy exporter status to keep demand, with USD/BRL unlikely to break 5.22 on local news alone.

Election risks versus strong carry

"In an otherwise supportive market for FX carry trades, the Brazilian real was a notable under-performer yesterday. Driving that was both a sell-side bank downgrading Brazilian equities to neutral from overweight, and a new poll result ahead of Brazilian presidential elections in early October."

"This seems the first day that politics has really started to hit the real this year. We would not chase the real lower, however. 13.4% implied yields through the one-month non-deliverable forwards and Brazil's position as a net energy exporter should keep the currency reasonably in demand."

"Positioning is probably quite crowded long the real now, but we suspect it would require a broadly stronger dollar, rather than local news, to send USD/BRL through 5.22."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

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