Brazil Real Rises on Bets Governments to Boost Economic Growth

By Adriana Brasileiro and Joao Oliveira
Dec. 30 (Bloomberg) -- Brazil’s real rose, paring the first yearly loss since 2002, on speculation governments around the world will continue to take measures to boost economic growth, benefiting exporting nations.
The currency climbed 3.6 percent to 2.3130 per U.S. dollar at 12:43 p.m. New York time, from 2.3972 yesterday. The advance, the biggest since Dec. 11, pared an 18 percent decline in the past three months as gains in global stocks stoked investor appetite for riskier assets.
“Brazil hasn’t lost its positive fundamentals amid the crisis, so investors come to our markets when there’s good news abroad,” Reginaldo Galhardo, a currency-trading manager at Treviso Corretora de Cambio in Sao Paulo, said in an interview with Bloomberg Television.
Stocks in the U.S., Europe and Asia climbed after the U.S. Treasury pledged $6 billion to support GMAC LLC, the financing arm of General Motors Corp., in an effort to keep the largest U.S. automaker out of bankruptcy.
Today’s gain won’t prevent the real from posting its first annual loss since falling 35 percent in 2002. The real has declined 24 percent this year, after rising 20 percent in 2007.
The central bank tapped into its record international reserves this year to support the currency. It spent $9.8 billion of foreign reserves in the spot market from September through Dec. 18, according to central bank data. All actions by Brazil’s central bank in the foreign exchange market to boost the real and improve credit conditions, including derivatives transactions and lending of reserves, reached $53.4 billion from Sept. 19 through Dec. 16, the central bank said.
Nine-Year High
Brazil’s currency rose to a nine-year high of 1.5545 per dollar on Aug. 1 as soaring commodity prices and the highest inflation-adjusted interest rate in the world flooded the currency market with dollars. The real slumped 33 percent since then as the international credit crisis damped economic growth, pushing commodity prices lower, and reduced financial investments in emerging markets.
Economists forecast the real will recover in 2009, ending the year at 2.25 per dollar, according to a weekly central bank survey of about 100 financial institutions published yesterday.
Brazil’s central bank bought $530 million worth of reais in the currency market today. The purchase includes an agreement to sell the reais back to the market on April 1 at a rate of 2.416464 per U.S. dollar, the bank said in a statement.
The bank also bought reais in the spot market in a separate auction at a rate of 2.3290 per dollar.
The yield on Brazil’s overnight futures contract for January 2010 fell 11 basis points, or 0.11 percentage point, to 12.21 percent. The yield on the government’s zero-coupon local- currency bonds due January 2010 fell 15 basis points to 12.26 percent.