Brazil's Real Falls on Bets Global Recession to Cut Investment

By Adriana Brasileiro

Nov. 17 (Bloomberg) -- Brazil's real fell as Japan joined countries slipping into a recession, increasing bets investment into Latin America's biggest economy will drop.

``Investors are very cautious because we aren't really sure how deep the economic slump will be,'' said Hideaki Iha, a currency trader at Fair Corretora in Sao Paulo. ``We do know global market liquidity will be severely reduced.''

The real declined 2.2 percent to 2.2910 per dollar at 7:26 a.m. New York time, from 2.2415 on Nov. 14. Brazil's currency has depreciated 28 percent in the past three months, the worst performance among the 16 major currencies tracked by Bloomberg.

Brazil had net foreign currency outflows of $4.6 billion in October, compared with net foreign inflows of $2.8 billion in September.

Japan's economy, the world's second largest, fell last quarter into its first recession since 2001, a report showed. The British economy will contract next year by the most since 1980. The U.S. has entered a recession that will last into next year, according to a survey taken by the National Association for Business Economics.

The yield on Brazil's overnight futures contract for January 2009 delivery fell 10 basis points, or 0.1 percentage point, to 13.55 percent. The yield on Brazil's zero-coupon bond due in January 2010 dropped 6 basis points to 15.19 percent, according to Banco Votorantim.

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