Brazil Real Rises as New U.S. Financial Aid Fuels Recovery Bets

By Adriana Brasileiro
Feb. 26 (Bloomberg) -- Brazil’s real strengthened for a second day on speculation new aid to the U.S. financial system may help pull the world’s largest economy out recession.
The real rose 0.4 percent to 2.3589 per U.S. dollar at 3:09 p.m. New York time, from 2.3691 yesterday.
President Barack Obama asked for as much as $750 billion in aid to shore up the financial industry in his first budget proposal. The funds would come on top of the $700 billion rescue package the U.S. Congress approved last October.
“The expansionist measures in the U.S. and around the world, especially those aimed at the financial system, are an effective way to restore confidence,” said Reginaldo Alexandre, vice-president of the Brazilian Association of Analysts and Capital Markets Investment Professionals, or Apimec.
Gains in commodities, which account for almost two-thirds of Brazil’s exports, also helped boost the real. Crude oil, a Brazilian export, rose to the highest level in a month.
Yields on Brazil’s local-currency bonds and overnight futures contracts fell after the country’s broadest measure of inflation advanced less than analyst expected.
The IGP-M price index calculated by the Getulio Vargas Foundation rose 0.26 percent in February, less than the median forecast of 0.41 percent in a Bloomberg survey of 29 economists.
The yield on Brazil’s zero-coupon, local-currency bonds due in January 2010 declined 15 basis points, or 0.15 percentage point, to 10.81 percent. The yield on the overnight futures contract for July delivery slid 11 basis points to 11.26 percent.
Bids Rejected
Brazil’s central bank didn’t accept any bids to buy reais in the currency market at three auctions today.
The bank said yesterday it would buy reais with U.S. dollars in three auctions in the foreign-exchange market to prop up the Brazilian currency. The contracts included an agreement to re-sell the reais at a later date, the central bank said in a statement.
“The central bank probably didn’t think the bids were interesting enough, so it didn’t see the need to buy reais at just any rate,” said Alex Martins, a currency trader at Futura Corretora in Sao Paulo.