Investors change bets on Brazil real, expect fall

* Market turmoil prompts investors to change their bets

* Foreign investors now betting the real will weaken

SAO PAULO, May 7 (BestGrowthStock) – Foreign investors this week
changed their bets on the prospects for the Brazilian currency
and are now expecting the real (BRBY: ) will weaken, as recent
market turmoil has increased risk aversion.

World markets have struggled in recent trading sessions as
persistent fears over the financial health of the euro zone
scared investors away from riskier emerging market assets.

Brazil’s real slumped 6.4 percent over the past three days
and by Thursday foreign investors had $2.6 billion worth of
bets that the currency would weaken, data from BMF&Bovespa, the
world’s third largest exchange operator, showed.

In the beginning of the week investors were long the real,
with $4.2 billion worth of bets that the real would rise.

The data also showed non-resident investors bought as much
as $6.8 billion in foreign exchange futures contracts and
derivatives contracts that pay the spread between fluctuations
in the exchange rate and local interbank rates between Monday
and Thursday. Almost $2 billion of that total was bought just
on Thursday.

The change in heart comes even as Brazil’s central bank
raised the benchmark interest rate for the first time in two
years last week to 9.50 percent from 8.75 percent, making
Brazilian assets more attractive because of higher yields.

Higher interest rates also tend to favor carry trade, in
which investors borrow from lower yielding currencies to chase
higher yields elsewhere.

Stock Market Investing

(Reporting by Silvio Cascione; Editing by Ana Nicolaci da
Costa and Diane Craft)

Investors change bets on Brazil real, expect fall