Brazil Real Rises for 8th Day as Traders Bet on Rate Increase

By Adriana Brasileiro
April 10 (Bloomberg) -- Brazil's real rose for an eighth day, the longest winning streak since February, as speculation the central bank will increase interest rates next week lured investors to the country's fixed-income market.
The real rose 0.3 percent to 1.6860 per dollar at 4:05 p.m. New York time, after most trading had ended in Brazil, from 1.6885 yesterday. It has advanced 20.1 percent in the past 12 months, the second-biggest gain among the 16 most-traded currencies against the dollar.
``Higher rates in Brazil will increase appetite for the local currency,'' said Juliana Braga, an investment strategist with Banco UBS Pactual SA in Sao Paulo. ``Brazil's yield curve is already pricing in that rate move.''
Yields on Brazil's most-traded overnight interest-rate futures contracts rose for a second day after a key consumer price index increased more than economists expected in March, adding to speculation the central bank will boost the benchmark lending rate.
The yield on Brazil's overnight interest-rate futures contract for January delivery was little changed at 12.46 percent, more than 1 percentage point above the central bank's benchmark overnight rate of 11.25 percent.
Consumer prices, as measured by the benchmark IPCA index, climbed 0.48 percent in March, more than the median 0.36 percent forecast in a Bloomberg News survey of 33 economists.
The annual inflation rate rose to a two-year high of 4.7 percent from 4.6 percent in February, the government said.
Economists forecast the central bank will increase the benchmark overnight benchmark rate to 11.50 percent on April 16, according to the median of 11 estimates in a Bloomberg survey.
Last month, central bankers considered raising the benchmark rate to curb inflation, minutes of the March 4-5 meeting showed. Policy makers boosted their 2008 inflation forecast on March 27 to 4.6 percent, above their annual target rate of 4.5 percent.
The yield on Brazil's zero-coupon bonds due in January 2010 fell 2.5 basis points today to 13.31 percent, according to Banco Bradesco SA.