SAO PAULO: Brazil's currency gained slightly in early trading on Thursday, as surging investment inflows into Latin America's largest economy offset concern over unrest in the Middle East.
The Brazilian real was bid at 1.666 reais per U.S. dollar on the local spot market, a level seen by investors as changing little over the next few days. The central bank reported on Wednesday that net foreign investment inflows reached a staggering $3.2 billion in the last week of January.
The real traded in line with U.S. stock futures, which pointed to a quiet open. Investors are likely to await a slew of economic data due later in the session for further direction.
Investors expect the real to remain stable and trade alongside commodity prices and risk-taking despite government efforts to weaken the currency, said BTG Pactual analyst Livio Ribeiro. Global factors, however, could add to volatility.
"The global story is a key element but any move above or below current levels seems unlikely at this point," said Carlos Gandolfo, a senior partner at Pioneer Corretora, one of Brazil's largest currency trading shops.
Unrest in Egypt, where crowds are seeking the ouster of President Hosni Mubarak, spread to Yemen, pushing prices for Brent crude futures for March up one percent to more than $103 per barrel.
Often, the real gains when prices of commodities from oil to soybeans and grains rise in international markets. The Chilean peso weakened even as prices of copper, the country's largest source of export revenue, rose to a record.
The Mexican currency was little changed on Thursday, gaining less than 0.1 percent to 12.015 to the dollar. The Chilean peso weakened 0.2 percent to 481.60 per dollar.
"Markets are hesitating to break the 480 peso level on fear of more central bank intervention," analysts at 4Cast Inc. market research company, noted in a report about the Chilean peso.
Yield spreads between emerging market bonds and U.S. Treasuries, a key gauge of risk aversion, remained mainly stable, according to JPMorgan Chase & Co.'s EMBI+ emerging markets bond index
Yields on Brazilian government debt were 1.64 percentage points more than those for U.S. debt, down 1 basis point from Wednesday. A lower debt spread, as the yield differential is known, indicates decreasing risk perception.
Yields rose on Brazilian interest rate futures as investors bet that deteriorating inflation expectations will lead the central bank to raise borrowing costs for a longer period.
The yield on the contract due January 2011 , one of the most heavily-traded contracts of the early session, rose to 12.36 percent from 12.34 percent.
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