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Brazil's Real Opens Stronger As Market Absorbs US Vote

RIO DE JANEIRO(Dow Jones)--The Brazilian real opened markedly stronger Tuesday against the U.S. dollar as investors appeared to absorb the shock of the rejection of a financial rescue package by the U.S. House of Representatives.

The real opened stronger at BRL1.920 to the dollar in trading on the Brazilian Mercantile & Futures Exchange, much stronger compared to Monday's close of BRL1.966.

The U.S. House "no" vote Monday shocked markets around the world and led to frantic selling of Brazilian stocks and a consequent strengthening of the dollar in Brazil. The dollar increased in value by 6.2% Monday against the real, the real's worst single-day performance since 1999.

Analysts Tuesday said they expected there would be some rebound in the currency market after such a fall and likewise a rebound in Brazilian stocks, which plummeted 9.36% Monday.

European markets also appeared to be recovering from the shock of the U.S. House vote on the $700 billion rescue package, with stock markets there either slightly lower or higher than Monday.

Sentiment in Europe appears to believe the House will pass a package of some description for the U.S. credit crisis by the end of this week.

Asian markets, although mixed, also appeared to have some confidence in a U.S. solution to the crisis and South Korean stocks traded higher Tuesday.

Meanwhile, more ailing assets surfaced in Europe. Franco-Belgian bank Dexia was strongly supported by both governments while Germany bailed out major home loan bank Hypo.

International markets have been heartened by European governments' willingness to bolster financial institutions.

Domestic Brazilian good news in the shape of a record federal government surplus for August of BRL6.25 billion, 70.2% more than August 2007, failed to brake Monday's steep weakening of the real but may help positive sentiment as the currency market shows signs of recovery Tuesday.

-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086; john.kolodziejski@dowjones.com

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(END) Dow Jones Newswires

September 30, 2008 09:13 ET (13:13 GMT)


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