20000206Brazil real ends firmer, economic outlook brighter

SAO PAULO: Brazil's real currency finished 0.9 percent firmer at a seven-month high Friday, helped by positive news that brightened the country's economic outlook, traders said.

The real closed at 1.769 per dollar, ending at the strongest level since July and firming 1.7 percent on the week.

"There was a strong influx of dollars today, which was also helped by the Central Bank's sales of dollar-pegged bonds," said one local currency trader.

The monetary authority sold 1.6 billion reais in NBC-E U.S. currency-linked debt, supplying the market with foreign exchange hedge instruments and taking pressure off of a dollar- hungry market.

The bond auction came on top of improving sentiment in the market, which was based on expectations that cash-strapped Minas Gerais state might reach an agreement with the federal government to avoid defaulting on its eurobonds.

The Minas government said after the market closed it had agreed to a debt renegotiation deal with the government. Markets had been worried that Minas, which declared a debt moratorium last year and contributed to the devaluation of the real, might default again, hurting investor confidence.

This week's modest U.S. interest rate increase, which came in line with market expectations also helped sentiment as investors were worried a big jump in U.S. rates could slow down capital inflows into Brazil.

At Friday's closing level, the real was still 31.6 percent weaker when compared with its pre-devaluation level.-Reuters