Brazil’s real hits one-month low on weak inflows

(Updates to close)

By Guillermo Parra-Bernal and Silvio Cascione

SAO PAULO, March 26 (BestGrowthStock) – Brazil’s currency hit its
lowest level in a month on Friday as traders sought to cover
money-losing positions in the derivatives markets and inflows
into the stock market dried up.

The real (BRBY: ) closed 1.1 percent down at 1.83 reais to
the dollar, the lowest level since Feb. 25. The currency has
shed 2 percent this month in the wake of falling inflows and
government efforts to weaken the currency.

Demand for U.S. dollars in Brazil’s $3 billion-a-day
currency market gained traction as euro zone nations neared an
accord to help Greece cut its budget deficit, averting a
sovereign debt crisis that could potentially hurt global
markets.

“Inflows have been slowly coming to a grinding halt,” said
Moacir Junior, a currency trader with Interbolsa in Sao Paulo.
“I have seen demand for export hedges and other tools drying
up, and the supply of dollars is getting tighter these days.”

Traders said a recent rise in the dollar as a result of the
euro debt crisis had turned some domestic trades in currency
options into money losers. Some investors zeroed those
positions by buying futures contracts and spot dollars,
spurring more dollar demand.

The real-dollar futures contract for April settlement
(2DOLJ0: ) was little changed, falling less than 0.1 percent at
1.822 to the dollar.

Foreign investors in Brazil are divesting some of their
positions in reais and remitting the money to their home
countries. In the month through March 19, outflows surpassed
inflows by $2.35 billion, according to central bank data.

But bets that the central bank will raise borrowing costs
for the first time in two years in April are helping pare back
the real’s decline, said Hersz Ferman, who helps manage $33
million in assets for Rio de Janeiro-based fund Yield Capital.

STOCKS RISE

Strong consumer confidence data in the United States fanned
hopes that a global economic recovery is on solid footing. The
improved market sentiment also helped pull Brazil’s benchmark
Bovespa stock index (.BVSP: ) 0.4 percent higher to 68,682.66,
led by steelmakers Gerdau (GGBR4.SA: ) and CSN (CSNA3.SA: ) and
mining giant Vale.

Gerdau, Latin America’s largest steelmaker, rose 3.2
percent to 27.24 reais. CSN, which late on Thursday announced a
2-for-1 stock split, added 1.6 percent to 34.79 reais — its
fourth gain in five sessions.

Preferred shares of Vale (VALE5.SA: ), the company’s most
widely traded class of stock, rose 0.4 percent to 48.38 reais
on bets it will win a sizable increase in the price of its ore
from Asian clients.

Preferred shares of Petrobras (PETR4.SA: ), the index’s
biggest stock, pared some of the Bovespa gains after a top
official said the company might have to offer more of the stock
to pay for increased capital expenditure plans [nN26161132].

The stock fell 2 percent to 34.50 reais after Investor
Relations Director Alexandre Quintao said an offering would be
possible. The company ruled out selling debt to pay for a 26
percent increase in investments through 2014.

Yields on Brazilian interest rate future contracts (0#DIJ:: )
were stable for the longest maturities. The yield on the
January 2011 (DIJF1: ) contract, the most widely traded, was
unchanged at 10.39 percent.

Investors use the rate contracts as a gauge of the level of
the Selic at the end of each maturity.

Stock Investing

(Editing by Kenneth Barry)

Brazil’s real hits one-month low on weak inflows