Brazil Real Pares Gains; Colombia Peso Rises: Latin Currencies

June 9 (<a href=quote.bloomberg.com>Bloomberg) -- Brazil's real gained for a fourth day in five on investors' expectations the government and companies will sell foreign currency bonds, keeping capital flowing to the country high even as bonds mature.

Brazil's real rose 0.4 percent to 2.8655 per dollar in Sao Paulo. Earlier, it gained 0.7 percent to 2.8550 after rising and fell as much as 0.2 percent to 2.8795. It has gained 24 percent this year, the best performer of 59 world currencies tracked by Bloomberg. Colombia's peso rose and Mexico's peso reversed declines to rise.

Brazilian banks and companies have contracted more than $6 billion of foreign currency bonds this year. Usinas Siderurgicas de Minas Gerais SA said today it plans to sell at least $50 billion of foreign bonds. In the last week banks such as Banco Banespa SA, a unit of Spain's Banco Santander Central Hispano SA sold more than $500 million of debt. Brazil's government may also sell.

```The rumors of a Brazilian sovereign sale are strong,'' said Marcelo Peregrino, who helps manage 25 million reais of bonds and stocks for Ativa SA, a Rio de Janeiro fund manager. ``The talk about the government selling a bond is helping the currency.''

The sales and planned sales are expected to help companies refinance the $1.5 billion of corporate bonds due between now and the end of July, Peregrino added. When Brazilian companies sell foreign currency bonds and convert the proceeds into reais, its increases demand for Brazil's currency, helping it gain against the dollar.

See-Saw Trading

In a day of see-saw trading that saw the real swing from a high of 2.8550 to the dollar to a low of 2.8795, gains were limited as some investors took advantage of last week's 3.2 percent rise in the real to buy dollars to pay for imports or make payments on foreign currency debts.

``I'm hearing people say that at current levels, it's a good time to buy dollars,'' said Carlos Gandolfo, a partner at Pioneer Corretora de Cambio Ltda., a Sao Paulo currency brokerage that handles about a third of all trades in Brazil's spot market.

Brazilian banks this Thursday must pay $550 million of foreign bonds. Of that, $300 million is owed by Banco Garantia, the Brazilian unit of Credit Suisse Group; $100 million by the Brazilian unit of Madrid-based Banco Santander SA and $150 million by Sao Paulo's Banco Votorantim SA.

Votorantim and Santander have both sold debt in the last week.

``There is a lot of maturing debt but beyond this, every week it seems we have someone else selling debt,'' Peregrino said.

The rough balance of maturing debt and new bond sales should keep the real in the 2.85 reais to the dollar to 2.95 reais to the dollar range for the next few weeks, he added.

Brazil's benchmark 8 percent bond maturing in 2014 fell a quarter cent to 91.38 cents on the dollar, boosting the yield to 10.11 percent, according to J.P. Morgan Chase & Co. The bond closed at a record high of 91.63 on Friday after earlier rising as high as 92.63 in intraday trading in New York and London.

Colombia

Colombia's peso rose for the sixth day in seven after Finance Minister Roberto Junguito's resignation Friday led to the designation of his deputy to assume the post, allaying investor concern about continuity of the country's economic policy.

The peso gained 0.5 percent to 2,814 per dollar in Bogota, and the benchmark 10 percent bond due January 2012 rose for a sixth day, adding 0.1 cent on the dollar to 114.35, paring its yield to 7.69 percent, according to J.P. Morgan Chase & Co. The yield has declined from a high of 14.46 percent on Sept. 19.

Colombian President Alvaro Uribe replaced Junguito with Deputy Finance Minister Alberto Carrasquilla, 44, a former technical vice director at the central bank. Carrasquilla, who said he would continue the economic policies undertaken by Junguito, will be sworn in June 20.

``It's clear the economic program is going to continue on the same track and at the same pace without skipping a beat,'' said Jose Cerritelli, an analyst at Bear, Stearns & Co. in New York.

Growth Course

Junguito, a former Colombian representative to the International Monetary Fund, was instrumental in signing a $2.1 billion, two-year standby loan accord with the IMF. He also helped push key pension, tax and labor bills through Congress aimed at cutting deficit spending and boosting growth.

Junguito felt he'd completed his mission,'' said Alvaro Camaro, head of research at Acciones y Valores SA brokerage. He got the accord with the IMF and he pushed through the key reforms.''

The government on Friday announced that industrial output, excluding coffee processing, rose 15.3 percent in March from the year- earlier month, the national statistics agency said in Bogota. Industrial sales rose 14.8 percent.

Accelerating industrial output may help the economy maintain its momentum after growing 3.8 percent in the first quarter, the biggest gain in the gross domestic product in five years.

Interest rates near historic lows have helped boost the construction industry, raising demand for metal products and other items used in building and helping create jobs.

Regional Currencies

Chile's peso fell for the fourth day in five, sliding 0.4 percent to 717.05 per dollar, paring its gain in 2003 to 0.5 percent.

Mexico's peso reversed declines to rise for the second day in three, adding 0.7 percent to 10.6560 per dollar, paring its decline in 2003 to 2.7 percent, the worst performance among the 16 most widely trade currencies.

Argentina's peso rose 0.6 percent to 2.8125 per dollar, boosting its gains in 2003 to 19 percent, the second-best performance among 59 currencies tracked by Bloomberg worldwide.

Peru's new sol was little changed at 3.4825 per dollar from 3.4818 on Friday. Venezuela this year fixed its bolivar at 1,598 per dollar.