Dollar's post-election surge: How far can it go?

The dollar surged past R$5.40 following Lula's reelection, sparking debate among analysts about its future trajectory, with projections ranging from above R$5.60 to a gradual return near R$5.30. Market volatility is expected to remain high in the short term due to uncertainty over the new administration's fiscal policy, with investors seeking safer assets. The key question is whether the government will adopt measures to ease concerns about public accounts. Some analysts, like Wells Fargo's Álvaro Vivanco, view the initial reaction as exaggerated, betting on a dollar decline to R$5.30 if fiscal adjustment occurs. Conversely, JPMorgan, Morgan Stanley, and Goldman Sachs project the dollar reaching R$5.50 to R$5.60 under deteriorating fiscal expectations.