Brazil's Real Gains for a Third Day as Crude Oil, Stocks Rise

By Drew Benson

Oct. 20 (Bloomberg) -- Brazil's real strengthened for a third day as crude oil increased and global stocks gained, boosting demand for higher-yielding, emerging-market assets.

The real climbed 0.8 percent to 2.1017 per dollar at 9:30 a.m. New York time, from 2.1190 on Oct. 17. The real has plunged 26 percent since it hit a record 1.5545 per dollar on Aug. 1.

``As long as we start to see some reduction in volatility in global markets, and that's something we're starting to see, there is more space for the real to strengthen,'' said Andre Delben Silva, a partner at Advisor Asset Management, a Sao Paulo-based firm with about 600 million reais ($285.4 million) under management. ``The real depreciated too much. The movement was aggregated by derivatives positions that a lot of companies had.''

The Brazilian central bank has taken measures including tapping record reserves, selling dollars and offering dollar loans to exporters.

``We are starting to see signs of improvement, and that the measures taken by the government and central bank are starting to work,'' Delben Silva said.

Brazil's central bank is set to hold its first auction of reserve dollars today, up to $2 billion, in a bid to unfreeze credit lines for exporters. The one-hour auction, which accepts sovereign global bonds as collateral, begins at 2 p.m. New York time.

The Standard & Poor's 500 Index gained 1.5 percent. Crude oil increased 2.7 percent to $73.81 a barrel.

The yield on Brazil's overnight futures contract for January 2009 delivery declined 2 basis points, or 0.02 percentage point, to 13.93 percent. The yield on Brazil's zero-coupon bond due in January 2010 was little changed at 14.79 percent, according to Banco Votorantim.

To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net