A panic in Brazil’s financial markets has laid bare plummeting investor confidence in the fiscal policy of President Luiz Inácio Lula da Silva, with his leftwing administration under intense pressure to fortify the public accounts of Latin America’s largest economy.

The real dropped to a record low against the US dollar on Wednesday, leading to aggressive central bank interventions to support the currency, in a sell-off that also hit share prices and pushed up government borrowing costs.

“Right now there’s absolute fear in the market, driven by fiscal concerns,” said Edwin Gutierrez, head of emerging market debt at asset manager Abrdn. “It’s not just the real — even in the external [sovereign] bond market there’s contagion. It’s irrational despondency.”