Jan. 4 (Bloomberg) -- Brazil's real fell on concern that U.S. jobs reports signal the U.S. economy may slip into a recession, reducing demand for Brazilian exports and local financial assets.


The real fell 0.2 percent to 1.7547 per dollar at 1:30 p.m. in New York after rising 1.1 percent earlier. The currency gained 20 percent against the dollar in 2007, the biggest advance among the 16 most-actively traded currencies, led by record sales abroad and growing interest for Brazil's high- yielding bonds.


``What soured the market mood today was the U.S. data that came in way worse than expected,'' said Rodrigo Ferreira, who helps manage 3.8 billion reais ($2.2 billion) in stocks and bonds as a fixed-income trader at Banco Alfa de Investimento in Sao Paulo.


Brazil's benchmark stock index, the Bovespa Index, fell as much as 3.7 percent.


Hiring in the U.S. slowed more than forecast in December and unemployment jumped to a two-year high, increasing the chances the Federal Reserve will attempt to prevent a recession by cutting interest rates by a half-percentage point, to 3.75 percent, at its meeting Jan. 30.
Payrolls rose by 18,000 in December, the least since August 2003, after a 115,000 gain in November that was larger than initially reported, the Labor Department said today in Washington. The jobless rate rose to 5.0 percent from 4.7 percent in November.


Economists surveyed by Bloomberg had forecast an increase of 70,000 in payrolls, according to the median of 74 estimates.
Interest-Rate Futures


Interest-rate futures contracts on the Chicago Board of Trade indicated a 58 percent chance the central bank will cut its benchmark lending rate to 3.75 percent, compared with 34 percent yesterday and no chance a week ago. The odds of a quarter-point reduction were 42 percent.
The yield on Brazil's zero-coupon bonds due in January 2009 rose 10 basis points, or 0.1 percentage point, to 12.08 percent, according to Banco Votorantim SA.


The trend is for Brazilian bonds and stocks to gain this year, boosting the allure of the real, said Andre Caminada, who helps manage the equivalent of about $228 million at Victoire Finance Capital in Sao Paulo.


``Despite the slowdown in global growth that we'll see this year, Brazil still offers upside in all markets,'' Caminada said in an interview with Bloomberg Television. ``Foreign investors are going to want to get in on the action.''
The outlook for the maintenance of Brazil's 11.25 percent benchmark lending rate to fend off inflationary pressures also favors the real while the U.S. overnight lending rate may fall below 4 percent, he said.
Maintaining Lending Rate


``Strong economic data, propelled by domestic demand, confirms that the central bank will likely stay unchanged at 11.25 percent until mid-2008 and beyond,'' Citigroup's Geoffrey Dennis and Jason Press wrote in an e-mailed report today.


Brazil's central bank bought U.S. dollars in the spot market today as part of a strategy to slow the currency's appreciation. The bank bought dollars at 1.7590 reais apiece at auction. The bank has bought dollars almost daily since Oct. 8.

Source :
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