Dollar and Ibovespa recover after election-driven selloff

The dollar fell 1.37% to R$5.334 on Tuesday, correcting after its largest one-day surge since 1999, triggered by President Lula's re-election. Future interest rates also dropped sharply following Monday's massive spike. The Ibovespa index traded volatile, down 0.23% at 176,188 points, with cyclical stocks recovering partially. Investors had priced in a Flávio Bolsonaro victory, so Lula's win surprised markets, raising fears of expansionary fiscal policy and increased public debt under his new government. The Treasury announced bond buybacks to curb future rate volatility, similar to March interventions. Analysts expect continued high volatility in domestic assets, though Tuesday's moves reflect an adjustment after Monday's circuit breaker-triggering selloff.