Brazilian Real Trades Near Week High as Risk Aversion Decreases

By Adriana Brasileiro

Oct. 29 (Bloomberg) -- Brazil's real traded near the highest level in a week as gains in stocks in Europe and Asia reduced investor aversion to higher-yielding assets.

Rising commodity prices also fueled demand for reais as raw materials account for two-thirds of the country's exports.

The real traded at 2.1587 per U.S. dollar at 8:22 a.m. New York time, from 2.1610 yesterday. It touched 2.1385, the most since Oct. 21. Brazil's currency has gained 6.8 percent this week, dropped its decline from a nine-year high of 1.5545 per dollar on Aug. 1 to about 28 percent.

``The market still lacks parameters for trading, so any improvement abroad helps improve the mood of investors,'' said Francisco Carvalho, head of currency trading in Sao Paulo at Liquidez Corretora, the biggest currency derivatives brokerage in Brazil.

Yields on Brazil's local-currency bonds and rate futures contracts dropped on speculation the central bank will halt six months of interest-rate increases to prevent the economy from slowing amid the global credit crunch. Banco Central do Brasil will leave the benchmark rate unchanged at 13.75 percent at a meeting today, according to the median forecast of 46 economists surveyed by Bloomberg News. Fifteen economists expect the central bank to raise the rate for a fifth straight time since April.

The yield on Brazil's zero-coupon bond due in January 2010 fell 37 basis points to 15.57 percent, according to Banco Votorantim.

The yield on Brazil's overnight futures contract for January 2009 delivery dropped 4 basis points, or 0.04 percentage point, to 13.88 percent.

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