Brazil's Real Rises to Near 7-Year High on Bets of Higher Flows

Brazil's real rose to near a seven- year high on speculation foreign investment flows to local bonds and stocks will rise.

``The strong flows to Brazilian markets act as a shield against bad news abroad,'' said Francisco Carvalho, head of currency trading in Sao Paulo at Liquidez Corretora DVTM, Brazil's second-biggest currency derivatives brokerage.

Brazil's currency rose 0.3 percent to 1.7347 per dollar at 7:43 a.m. New York time. It touched 1.7269 on Nov. 6, the strongest since March 2000.

The real is the second-biggest gainer this year against the U.S. dollar among the 16 most actively traded currencies tracked by Bloomberg News, advancing 23.4 percent. Canada's dollar is up 26 percent.

Losses among financial-services companies in the U.S. weren't affecting Brazil's market, according to Carvalho. Morgan Stanley joined Merrill Lynch & Co. and Citigroup Inc. in writing down losses on subprime mortgage-related assets and said the outlook for credit markets is bleaker than in September.

The second-biggest U.S. securities firm by market value after Goldman Sachs Group Inc. said it lost $3.7 billion in the two months through Oct. 31. Losses related to securities linked to home loans to risky borrowers cut fourth-quarter earnings by $2.5 billion, the New York-based bank said today.

The yield on Brazil's benchmark zero-coupon bonds due in January 2008 fell less than 1 basis point, or 0.01 percentage point, to 11.18 percent, according to Banco UBS Pactual SA.
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