Brazilian Real Bulls Stand Firm as Lula Upside Protection Premiums Surge After First-Round Vote

Hedge funds retain USD/BRL puts ahead of runoff as premiums to protect against a Lula upset spike

Foreign exchange options investors are maintaining bullish positions on the Brazilian real following Jair Bolsonaro’s strong first-round showing in the presidential election, even as the cost of hedging against a potential Luiz Inácio Lula da Silva victory has climbed sharply.

Dealers report that roughly 95% of all US dollar/Brazilian real options trades entered the vote positioned for a stronger real should the more fiscally conservative candidate prevail.

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