Brazilian stocks rose on the heels of buying in New York on Friday, while the local currency strengthened as futures contracts moved sharply and pointed toward a stronger real.
The benchmark Bovespa index of the Sao Paulo Stock Exchange closed 2.29 percent higher at an eight-month high of 23,777 points, led higher by an 1.11 percent rise in the Dow Jones industrial average. With a 3.5 percent increase for the week, the Bovespa is now nearly 7 percent higher in the year so far.
Bellwether share Tele Norte Leste Participacoes rose 1.86 percent to 38.35 reais. It makes up about 12 percent of the index.
The real strengthened 0.7 percent to 2.84 reais per US dollar. Volume was low, but the currency moved on a sharp change in futures contracts as some Brazilian banks tried to cover positions taken last week, when they wrongly bet the central bank would intervene to weaken the real.
The real ended at its strongest level since January 22. While a strong real can hurt exports, it also cuts inflationary pressures the government is trying to avoid. Trade results lent support to the real. The trade surplus came in at $3.172 billion September, widening the result since January to more than $25 billion. It should hit a record $32 billion by year end.
"This kind of result is very favorable for the current account," said Jorge Kattar, a derivatives trader at Rabobank in Sao Paulo.
Brazil should post a current account surplus of about $8 billion, the second surplus in two years after years of trying to control its balance of payments deficit.
The strengthening on Friday also came despite the retirement of some $452 million in dollar-linked bonds that were settled in reais by the central bank.
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