FX.co ★ Brazilian Real Retreats from Two-Year High

The Brazilian real depreciated to 5.07 per USD in mid-May, retreating sharply from the two-year high of 4.89 reached earlier in the month. The decline followed reports alleging links between Senator Flávio Bolsonaro — a candidate in Brazil’s October presidential election — and Daniel Vorcaro, the owner of failed lender Banco Master, who has been charged with fraud. Investors judged that the accusations could erode Bolsonaro’s candidacy, currently seen as the main challenger to President Luiz Inácio Lula da Silva. Externally, the US dollar strengthened in tandem with rising Treasury yields, as markets increasingly priced in the likelihood of additional Federal Reserve interest rate hikes later this year.