The Brazilian real on Thursday slumped to a 9-1/2-year low while the Bovespa stock index erased its 2014 gains as investors feared President Dilma Rousseff may defeat market-favorite candidate Aecio Neves in Sunday's presidential election.
The Brazilian real slid 1.36 percent to close at 2.5130 per dollar, its weakest closing level since April 2005.
The Bovespa index .BVSP fell 3.2 percent in the session, recording losses of 1.5 percent in the year to date, while other key Latin American stock indexes such as Mexico's IPC .MXX and Chile's IPSA .IPSA were up.
Leading losses in Brazil were companies that investors expect to suffer further under a second Rousseff administration: shares of banks Itau Unibanco (ITUB4.SA) and Bradesco (BBDC4.SA), as well as those of oil producer Petrobras (PETR4.SA), all dropped at least 4.5 percent.
"It looks like the market is throwing in the towel," said a fund manager in Rio de Janeiro.
Bets that Neves would become Brazil's next president had boosted Brazilian stocks and currency since he recovered from a distant third place just before the first round of elections on Oct. 5 and made it to the runoff against Rousseff.
Neves has promised business-friendly policies to boost Brazil's flagging economy, while Rousseff has said she will build on the policies that have lifted millions of Brazilians out of poverty during the past 12 years.
Recent polls showing the incumbent president had pulled ahead of Neves have left investors jittery. After markets closed, two major surveys by pollsters Ibope and Datafolha showed Rousseff gaining a clear lead just three days before the election.
Still, many analysts have been taking Brazilian opinion polls with a grain of salt since they failed to accurately gauge the extent of Neves' surge in voter support on the eve of the first round.
"The market doesn't know where to aim at in these final days before the elections," said Glauber Romano, a currency trader with Intercam brokerage in Brazil.
Data showing Brazil's unemployment rate dropped slightly to 4.9 percent in September suggested Rousseff may benefit from a growing voter perception, captured by recent opinion polls, that the economy is improving.
Brazil's unemployment rate has been low even as the pace of job creation remained well below the average of the past decade as the economy slipped into a recession and many companies trimmed payrolls.
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