Brazil’s Real Increases as Interest Rates Attract Investment

By Telma Marotto

June 16 (Bloomberg) -- Brazil’s real rose for the first time in three days as interest rates among the highest in the world attract investments to Latin America’s biggest economy and as commodity prices increased.

The currency gained 0.8 percent to 1.9344 per U.S. dollar at 8:24 a.m. New York time, from 1.9502 yesterday. The real is up 20 percent in 2009, the best performer against the dollar among the 16 most-traded currencies tracked by Bloomberg.

Policy makers cut the benchmark interest rate more than economists estimated to a record low of 9.25 percent on June 10. The rate is high enough to keep attracting investments, said Luciano Sobral, an analyst with Sao Paulo-based FRAM Capital Participacoes SA.

“A country with a strong currency, good external accounts and solid growth and yet paying such high interest rates -- it’s rare to find,” Sobral said. “Brazil is in a relatively strong position for having a strong currency and being a commodities exporter.”

The central bank lowered its benchmark rate by 1 percentage point after the market closed on June 10, more than the 0.75- percentage-point reduction forecast in a Bloomberg survey of 48 economists. Policy makers have cut borrowing costs four times this year, reducing the rate from 13.75 percent to shore up the economy amid the global financial crisis.

The UBS Bloomberg Constant Maturity Commodity Index rose 1.7 percent today. Nearly two-thirds of Brazil’s exports are commodities like iron ore, oil and soybeans.

To contact the reporters on this story: Telma Marotto in Sao Paulo at tmarotto1@bloomberg.net