By Drew Benson and Andrea Jaramillo
Oct. 14 (Bloomberg) -- Brazil's real rose for a second day on a U.S. plan to inject $250 billion into banks and as Brazil's central bank again sold dollars in the spot market.
The U.S. effort outlined this morning shored up confidence in the global financial system and spurred demand for higher- yielding assets.
Brazil's central bank announced that it was selling dollars for 2.09 reais in the spot market shortly after 11 a.m. New York time as the real began to trim its gains. Later, the authority said it will sell up to $1 billion worth of U.S. dollars at auction tomorrow, along with contracts to repurchase them on Jan. 15, 2009. The bank will accept offers from 10 a.m. to 10:30 a.m. New York time.
The real rose 2.3 percent to 2.0963 per dollar at 5:36 p.m. New York time, following a 7.9 percent surge yesterday. The rally nearly erases last week's 11.6 percent plunge.
The real's gain came amid a region-wide rally of Latin American currencies in which Colombia's peso rose 2.3 percent to 2,260 per dollar. Markets were closed in Bogota yesterday for a national holiday.
``We've seen markets adjust to the U.S. package; the question is, is it sustainable,'' said Meg Browne, vice president of foreign-exchange research at Brown Brothers Harriman & Co. in New York. ``Brazil is tied to the global economy and the global economy is suffering.''
The real's 26 percent slide from a nine-year high reached on Aug. 1 ``may have overshot, but the trend is going to be for a softer real,'' Browne said.
The yield on Brazil's overnight futures contract for January 2010 delivery rose 5 basis points, or 0.05 percentage point, to 14.69 percent. The yield on Brazil's zero-coupon bond due in January 2010 rose 6 basis points to 14.76 percent, according to Banco Votorantim.
Money-Market Rates
Money-market rates fell for a second day in London today, as the bailout measures eased credit markets. The London interbank offered rate, or Libor, for three-month dollar loans dropped 12 basis points to 4.64 percent today, the British Bankers' Association said.
Colombia's peso bonds also surged following improved investor confidence, said Jorge Cortes, an economist at Corporacion Financiera Colombiana SA in Bogota.
The yield on Colombia's benchmark 11 percent bonds due in July 2020 fell 27 basis points to 12.53 percent, according to Colombia's stock exchange.
``What we've been seeing in the last few weeks are speculative moves, more than actual capital flows coming in or leaving the country,'' Cortes said. He forecasts the peso will strengthen to 2,086 per dollar by the end of October.
Finance Minister Oscar Ivan Zuluaga said today Colombia plans to sell 200 billion pesos ($89 million) in securities this week, concluding its plans to issue 21.7 trillion pesos in local debt this year.
Chile's Peso
In Chile, the peso advanced 1.7 percent to 606.57 per dollar, from 616.56 yesterday. The yield on the nation's peso bonds due in March 2013 fell 14 basis points to 6.87 percent, according to Chile's Commerce Exchange.
Peru's sol strengthened for a fourth day, gaining 1.1 percent to 3.0251 per dollar, from 3.0585 yesterday. The central bank sold $48 million to ease the currency's slide.
The yield on Peru's 8.6 percent sol-denominated bond due in August 2017 increased 25 basis points to 9.55 percent, according to the local unit of Citigroup Inc.
Argentina's peso climbed 0.9 percent to 3.194 per dollar, compared with 3.221 yesterday. The yield on the country's inflation-linked peso bonds due in December 2033 was little changed at 13.64 percent, according to Bloomberg data.
Venezuela's bolivar strengthened 1 percent to 5.1 per dollar in the unregulated market from 5.15 yesterday, traders said. Venezuela pegs the currency at an official exchange rate of 2.15 per dollar under restrictions imposed in 2003. People turn to the unregulated market when they can't get dollars at the official rate.
To contact the reporters on this story: Drew Benson in Buenos Aires at abenson9@bloomberg.net; Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net
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