Brazil real hits 3-yr low vs dollar; stocks gain

Wed Dec 3, 2008 4:28pm EST
(Updates to close)
SAO PAULO, Dec 3 (Reuters) - Brazil's currency slumped to its lowest close against the dollar in more than three years on Wednesday, despite central bank support, as the financial crisis continued to boost demand for the U.S. currency.
Stocks ended slightly higher, recovering from early falls in volatile trade, supported by strong gains in energy company Petrobras and after U.S. shares shrugged off more gloomy economic and corporate data and climbed in late trade.
The Sao Paulo Stock Exchange's benchmark Bovespa index .BVSP ended up 0.85 percent at 35,296 after falling 3.4 percent earlier in the day.
The Brazilian real BRBY ended at 2.475 per dollar, down about 3.5 percent on the day even after Brazil's central bank offered dollars in two auctions on the spot market to supply liquidity. The central bank also sold $1.96 billion in dollar repurchase agreements in an auction aimed at improving credit to exporters.
"It is strong speculation, there is no other explanation for this volatility in the market," said Reginaldo Galhardo, foreign exchange manager at Treviso brokerage.
The real has shed more than a third of its value since hitting a nine-year high in August as foreign investors have yanked money from emerging markets like Brazil, leading to a scarcity of dollars.
Net outflows of U.S. dollars from Brazil totaled $7.16 billion in November versus $4.64 billion in October, central bank data showed on Wednesday.
On the stock market, shares of state-run oil company Petrobras (PETR4.SA: Quote, Profile, Research, Stock Buzz) jumped 5.5 percent to 19.31 reais, helping to support other stocks.
Petrobras, Brazil's biggest firm, said it will not cut its five-year investment plans despite the global financial turmoil and that it expects to raise more than $1 billion on the international capital markets in December.
"The company is not thinking about reducing investments nor excluding any projects," Petrobras' exploration and production director, Guilherme Estrella, told reporters during a seminar hosted by Brazil's BNDES development bank in Rio.
Mining company Vale (VALE5.SA: Quote, Profile, Research, Stock Buzz) made up some ground from early losses to close down 0.13 percent at 22.46 reais.
Vale, the world's largest iron ore miner, said on Wednesday the flagging global economy was forcing it to lay off 1,300 workers and put 5,500 more on paid leave, accounting for 11 percent of its global workforce of 62,000.
Vale's managing director of iron ore sales, Fidel Blanco, said in a conference in Paris the company did not expect raw material prices to soar next year due to the global financial crisis.
"We have a credit crunch, contraction in the economy, huge destockings taking place of raw materials and the demand is really dull," he said.
Interest-rate futures <0#dij:> at the BM&F commodities and futures exchange were lower across the curve, as investors waited for next week's monetary policy meeting where the central bank is widely expected to keep its benchmark lending rate on hold at 13.75 percent. (Reporting by Renato Andrade and Stuart Grudgings; Additional reporting by Denise Luna in Rio de Janeiro; Editing by Leslie Adler)