Brazilian Real Gains on Speculation U.S. Will Revive Bailout

By Adriana Brasileiro

Sept. 30 (Bloomberg) -- Brazil's real rose for the first time in three days on speculation U.S. lawmakers will try to revive a $700 billion rescue plan for financial markets.

The real jumped 3.1 percent to 1.9023 per dollar at 3:39 p.m. New York time, after most trading had ended in Brazil. The currency fell yesterday the most in nine years, weakening past the 2-per-dollar level for the first time this year. Brazil's real is the worst performer among the 16 most-actively traded currencies, having tumbled 14 percent this month.

``Everybody believes that something will happen soon,'' said Fernando Fix, chief economist at Votorantim Asset Management in Sao Paulo.

Stocks rose as Brazil's benchmark Bovespa index soared as much as 5.7 percent, led by utilities and banks.

Brazil's fundamentals remain solid, Nick Chamie and a group of analysts at RBC Capital Markets wrote in a report.

``Foreign direct investment flows are forecast to remain relatively high at $32 billion in 2008, covering this year's current account deficit in full and helping cushion the real from volatile risk appetite and portfolio investment swings in a world of tighter liquidity,'' the analysts wrote.

They predict the real will hold in the 1.75 to 1.85 per dollar range in the fourth quarter, and weaken to 1.95 by the end of 2009 as the trade surplus shrinks and growth slows, reducing investment flows.

The yield on Brazil's zero-coupon bond due in January 2010 fell 24 basis points, or 0.24 percentage point, to 14.53 percent. The yield on Brazil's overnight futures contract for January 2009 delivery was little changed at 14.02 percent.

To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net