Real is the currency that lost the most value in the world with reaction to the Silveira case, survey shows

The real was the currency with the worst performance this Friday (22) in the entire planet. The dollar ended the day up 4.07%, at R$4.8065, the highest percentage since March 16, 2020 — at the beginning of the pandemic.

With this high, the dollar ended the week at the highest level since March 24.

The devaluation of the Brazilian currency is practically double that seen in comparable markets, such as Latin Americans or large commodity exporters.

Among the more than 40 currencies monitored by the quotation platform Refinitiv, the Colombian peso was in second place in the ranking of currencies that lost the most value, but with half the loss registered with the real.

In Colombia, the dollar was 2.18% more expensive. South Africa, Chile and Peru all suffered modest losses, and the US currency rose by less than 1.5%.

Analysts say that the big difference between the real and other currencies is the political news.

The fear of a new institutional crisis weighed heavily on business, especially for foreigners, after President Jair Bolsonaro (PL) contradicted the decision of the Federal Supreme Court (STF) with a pardon to deputy Daniel Silveira (PTB-RJ).

A manager specializing in emerging markets in London explains that the pardon has reignited fears that the electoral process in Brazil could be as confusing as the last US election.

The political confusion, he explains, makes part of the foreigners choose to leave or reduce investments in the Brazilian market.

A foreign exchange bureau chief in São Paulo agrees that the political news made the difference in the real’s tumble this Friday.

Foreigners, he says, have entered Brazil in large volume in recent months with an eye on the double-digit interest paid by fixed income today. And, since then, the episode between Bolsonaro and the Supreme is considered by him the first major domestic political problem.

That’s why, he explains, some foreigners prefer to go out. And, as the exit door is small for so many foreigners, he explains, the dollar soars.

In addition to the Brazilian political news, the dollar is rising in most emerging markets – but at a less intense pace than in Brazil – because of the signals from the Federal Reserve, the US Central Bank.

Yesterday, Fed Chair Jerome Powell said that a stronger interest rate hike is being considered at the meeting scheduled for early May. Higher interest there means a stronger dollar, as more investors would flock to the U.S. pay.