Brazil's Real Rebounds After About 8% Drop as Wall Street Views Split

Brazil's real rebounded for a second straight trading session after an about 8% plunge, as divided Wall Street views left investors weighing fiscal risks and whether the selloff had run its course.

The roughly 8% fall was the real's largest single-day decline in more than 20 years. Brazilian stocks continued to fall, and the currency's recovery had not produced a clear reversal in the broader market.

Lula's reelection result caught investors off guard. Citi closed bullish positions in Brazil, Morgan Stanley downgraded Brazilian equities, and JPMorgan lowered its allocation recommendations for the real and local interest rates.

Wells Fargo viewed the market response as excessive and recommended adding to real exposure on dips. GQG Partners was preparing to add exposure after the market panic.

Fiscal concerns continued to weigh on Brazilian assets. Investors were waiting for Lula's government to announce its economic team and fiscal plan, which could help them assess whether it can pursue fiscal adjustments.