razil Real Ends Stronger, Reverses Course On Fed Statement

Brazil Real Ends Stronger, Reverses Course On Fed Statement SAO PAULO (Dow Jones)--The Brazilian real was heading for a weaker close Wednesday, but quickly reversed direction after well-received news from the U.S. Federal Reserve. The real closed at BRL2.252 per dollar on the Brazilian Mercantile and Futures Exchange, or BM&F, compared with BRL2.285 on Tuesday. The real opened weaker in light trade, moving to BRL2.30 to the dollar intraday, it's lowest level on the week. The real quickly gained following well-received comments by the Federal Reserve regarding its planned purchase of $300 billion in U.S. Treasurys and increasing its mortgage-backed securities lending program by another $750 billion. Interest rates were maintained near 0% as expected. Panama and Israel both announced new bond issues Wednesday, providing investors with some notion that risk appetite was back in business. But nothing moved the real more Wednesday than the Fed, analysts said. "If we don't hear any more bad news, then you will see the real go to a new trading range of 2.10 to 2.20 in our view," said Francisco Giminez, a broker at NGO Corretora de Cambio in Sao Paulo. Giminez said much of the real strength at the end of the day was investors selling out of long dollar positions and buying equities or reals on the Fed statement. In credit markets, interest-rate futures for January 2010 declined to 9.83%, compared with 9.96% at Tuesday's close. The BM&F's interest-rate futures contracts are popular contracts for investors wishing to speculate on or hedge interest-rate risks. Expectations are for further official rate cuts in Brazil due to the slowing economy. Brazil's benchmark Selic rate is 11.25% and was trimmed by 150 basis points last week.