RIO DE JANEIRO: Brazilian stocks and currency dropped on Wednesday on signs that President Dilma Rousseff, criticized by investors for excessive intervention in the economy, was regaining voter support ahead of October presidential elections.
Recent opinion polls, including one by the Vox Populi institute released on Wednesday, showed Rousseff neck-and-neck with environmentalist Marina Silva in an expected second-round vote on Oct. 26.
Silva has won over investors with orthodox economic proposals similar to those of presidential candidate Aecio Neves, the initial market favorite who now stands third in the race. Polls showing she was set to beat Rousseff in a run-off had triggered a sharp market rally last month.
On Wednesday, however, the Brazilian real traded weaker than 2.3 per dollar for the first time in more than a month as the Vox Populi survey left investors more cautious before a major poll by the Datafolha institute later in the day.
Brazil's benchmark Bovespa index dropped 1.8 percent and traded below 58,000 points for the first time in three weeks.
Other Latin American currencies and stock indexes were little changed as investors' appetite for emerging market risk ebbed on concern that the US Federal Reserve may signal next week that interest rates could go up earlier than anticipated.
"The election scenario and an adjustment in market expectations for the Fed are bolstering the dollar toward the level of 2.3 reais," said Eduardo Velho, chief economist with INVX Global in Sao Paulo.
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