Brazil real rises near 1-month high, stocks ease

Thu Apr 10, 2008 12:40pm EDT
SAO PAULO, April 10 (Reuters) - Brazil's currency gained for an eighth consecutive session on Thursday on expectations higher local interest rates will lure foreign investments to the domestic bond market, while stocks seesawed.
The Sao Paulo Stock Exchange's benchmark Bovespa index .BVSP slipped 0.16 percent to 63,385.17 points as blue-chip stocks Vale and Petrobras fell.
Brazil's currency, the real BRBY , gained 0.59 percent to 1.68 per U.S. dollar, its strongest level since March 14.
The real may stay strong against the dollar as investors bet an increase in the benchmark lending rate next week will increase the appeal of Brazilian fixed income securities, said Gerson de Nobrega, treasury desk manager at Banco Alfa de Investimento.
"Given this expectation over a (rate) hike, Brazil really becomes much more attractive," Nobrega said.
Worse-than-expected data on Brazil's inflation on Wednesday reinforced the expectation policy-makers will raise the benchmark Selic rate from a record low of 11.25 percent.
Interest-rate futures <0#dij:> at the BM&F commodities and futures exchange in Sao Paulo were mostly lower, a day after rates surged because of the inflation figures.
At the stock exchange, Petrobras (PETR4.SA: Quote, Profile, Research), the top-weighted stock in the Bovespa index, fell 0.3 percent to 79.8 reais, tracking a decline in crude prices from near record highs.
Vale (VALE5.SA: Quote, Profile, Research) fell 1.03 percent to 50.68 reais. HSBC said in a report on Wednesday the mining company's bid to diversify its business "might prove to be a difficult and expensive task." Vale last month failed to buy rival Xstrata to expand into coal, nickel and copper.
Construction company Cyrela (CYRE3.SA: Quote, Profile, Research) rose 1 percent to 25.5 reais. Citigroup said in a report on Thursday preliminary data on Cyrela's buildings in the first quarter signal the company's results "should be very strong in terms of growth." (Reporting by Elzio Barreto and Silvio Cascione; editing by Gary Crosse)