Brazil's Real Falls to Two-Week Low as Ruble Defense Loosened

By Adriana Brasileiro

Nov. 12 (Bloomberg) -- Brazil's real dropped to a two-week low after Russia scaled back its defense of the ruble yesterday, prompting investors to shun emerging-market assets.

``The devaluation of the ruble in Russia hurt the performance of emerging-market currencies overnight and is increasing aversion to the real,'' said Leonardo Breder, a fixed-income manager who helps oversee about $90 million at Nobel Asset Management in Rio de Janeiro.

The real decreased 2.8 percent to 2.2710 per dollar at 8:19 a.m. New York time. It reached 2.2795, the weakest level since Oct. 27. The currency has depreciated 29 percent in the past three months, the worst performance among the 16 major currencies tracked by Bloomberg News.

Brazil's central bank bought reais in the foreign-exchange market today at a rate of 2.2550 per U.S. dollar to shore up the currency. It also plans to support the real by offering up to 10,000 currency swaps.

Russian policy makers widened the ruble's trading band against a basket of dollars and euros by 30 kopeks (1 cent) and increased the benchmark interest rate to stem record capital outflows. The ruble slid 1 percent yesterday, the biggest drop in two months.

The yield on Brazil's zero-coupon bond due in January 2010 was unchanged at 15.29 percent, according to Banco Votorantim. The yield on Brazil's overnight futures contract for January 2009 delivery dropped 1 basis point to 13.67 percent.

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