Brazil's unexpected decision to raise interest rates this week strengthened its currency on Friday, but contributed to the decline of stocks, which also tracked Wall Street downward. The central bank's Monetary Policy Committee, or Copom, raised on Wednesday evening the country's benchmark Selic rate to 19.50 percent from 19.25 percent a year. The decision only had impact on the markets on Friday because they were closed on Thursday for a local holiday.
The higher Selic, however, weighed on the Sao Paulo Stock Exchange's benchmark Bovespa index, which closed 1.18 percent lower at 24,767 points.
Bovespa bellwether Tele Norte Leste Participacoes, which makes up about 12 percent of the index, lost 1.06 percent to close at 37.25 reais.
Stocks started the day higher as the US equity rally on Thursday, when local markets were closed, gave the locals momentum.
"We opened stronger but couldn't stand New York losses," said Junior Hydalgo, a trader with Intra brokerage in Sao Paulo. "The market turned negative very quickly. That shows how weak it is.
Brazil's currency, the real, strengthened 0.94 percent to 2.538 reais as analysts said higher interest rates should help maintain the positive flow of dollars into the country.
"Inflows were small but positive today. The dollar fell against the real as the market feels interest rates should remain high," said a currency trader at a mid-sized bank in Sao Paulo.