The Brazilian real kept to its 2012 winning streak Friday, strengthening against the U.S. dollar on inflows from overseas bond issues by Brazilian companies.
The real was trading at BRL1.7759 to the dollar early in the session, stronger than the Thursday close of BRL1.7831, according to Tullett Prebon via FactSet.
Thursday night, government-run Banco do Brasil (BBAS3.BR) joined the parade of Brazilian companies issuing overseas bonds. The bank raised $1 billion from an issue of perpetual bonds sold at a yield of 9.25%. Brazil's government tapped the international bond market the first week of January, with a number of major Brazilian companies following suit.
"Dollars from these first bond issues of the year are now flowing into the Brazilian market," said Durval Correa, a trader at Sao Paulo's Multi Money brokerage.
He said there was also some pressure on the dollar from banks holding short-dollar positions.
However, the real could run into resistance as it approaches the BRL1.75 level, Correa said.
"The bond issues won't last forever," he said. "When that well runs dry, the market will discover that Brazil is running a trade deficit and the real could see a reversal."
Brazil posted a $105 million foreign trade deficit for the first week of the year. Deficits could continue through the end of the month as global demand for manufactured products weakens, economists said.
The real has gained more than 4.0% against the dollar so far in 2012.
Traders said an easing of debt tensions in Europe was also favoring the real. Italy managed to sell more bonds to the market earlier Friday at interest rates lower than in 2011.
"A somewhat more favorable outlook for Europe is helping encourage foreign investment inflows again," said Correa. "Today, every aspect of the market is lending support to the real."

Source: The Wall Street Journal