BRL gaps higher at the open,.........>

BRAZILIAN REAL: BRL gaps higher at the open, retracing some of last week's sharp

drop that culminated in alltime lows of 5.7475. Nonetheless, there is little

sign of a full reversal in BRL just yet, with the government still exposed to

considerable reputational risk. This is reflected in the lurch higher in USD/BRL

front-end risk reversals, which wiped out weeks of downside in just two sessions

last week.

- The political crisis remains fraught after the Justice Minister's resignation

on Bolsonaro's intention to replace the head of police, exposing the government

to corruption claims and - in the extreme - impeachment and criminal

investigation into the President.

- Analysts have flagged the next risk as being the potential resignation of the

finance minister Guedes - which would mark a further blow to Bolsonaro's reform

promises that had been at the core of his presidential campaign and term so far.

The risk of this appears to have moderated slightly this weekend after the

President expressed his support for the FinMin publicly, followed by Guedes

himself stating the government's economic plans are unchanged.