The number of the day is R$ 5.45. That was the dollar's rate near noon on Monday (26), up 9.3% from Friday, and it peaked at R$ 5.60, according to G1. For anyone buying US$ 100, that meant paying almost R$ 50 more than at Friday's close.
Brazil's stock market had its worst day since the pandemic. The Ibovespa, the benchmark index of the Sao Paulo exchange, fell more than 10% in the first minutes and trading was suspended for 30 minutes, the first circuit breaker since March 2020, according to Folha. When trading resumed, losses topped 17%, and near noon the index was down 15.8% at 172,669 points.
B3, the exchange operator, announced the halt even before the opening bell, after indicative prices pointed to a possible drop of more than 20%. In a statement, it said a new circuit breaker will be triggered if losses reach 20% from the previous close, with a 15-minute pause.
What a circuit breaker is
A circuit breaker is an emergency brake for the stock market. When the Ibovespa falls 10%, trading stops for 30 minutes; at 15%, the pause lasts an hour. The goal is to give investors time to digest the news and prevent panic selling.
The government stepped in on both fronts. The National Treasury bought back R$ 7.1 billion in public bonds in three auctions, an operation in which the state repurchases debt paper to contain the spike in interest rates, according to G1. It also canceled bond auctions scheduled for this week and kept only the offer of notes tied to the Selic, Brazil's benchmark interest rate, InfoMoney reported.
At the Central Bank, the tone was caution. Fernando Rocha, head of the Statistics Department, said it was too early to measure the impact on Brazil's balance of payments, the ledger of all dollars flowing in and out of the country:
"It is too early to claim any impact today, at 11 a.m. on a Monday, so soon after yesterday's election result. We have to wait longer to see what the market's more definitive reaction will be," Rocha said, according to Folha.
The Focus bulletin, which gathers forecasts from economists surveyed by the Central Bank, projected the dollar at R$ 5.05 at the end of this year. The responses, however, were given before the election result.
At Petrobras, shares fell around 10%. The state oil company's CEO, Magda Chambriard, called the move "speculative" in an interview with Reuters. "It's time to buy (shares). Unfortunately I can't," she said.
Monday's rout reverses the bet markets had placed on a victory by Senator Flavio Bolsonaro, defeated by President Luiz Inacio Lula da Silva in Sunday's (25) runoff. Since August the dollar had retreated about 2%, and yields on fixed-rate government bonds maturing in 2032 fell from 14.15% to 12.89% a year before the runoff, according to InfoMoney. Part of those gains evaporated within hours.