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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: Steve Fancy who wrote (11521)	1/13/1999 9:57:00 AM
From: Steve Fancy	Respond to of 22640

FOCUS-Brazil devalues cherished real to fight crisis Reuters, Wednesday, January 13, 1999 at 08:08 (updates with real devaluation, central bank governor resigns) By William Schomberg BRASILIA, Jan 13 (Reuters) - Brazil, desperately seeking a way out of a deep financial crisis, effectively devalued its inflation-busting real currency by nearly eight percent on Wednesday after the president of the Central Bank said he would resign. The dollar rose by 8.6 percent against the real -- an effective real devaluation of roughly 7.5 percent -- immediately after the Central Bank removed a tight mini-band in which the currency had previously traded. The real was trading at 1.3/1.315 reais to the dollar, close to a new floor of 1.32 immediately after the announcement of the new wider band. The real closed at 1.2110 to the dollar on Tuesday. Financial markets around the world were already in turmoil before Wednesday's announcement amid fears that Brazil would not be able to keep a grip on the real amid huge dollar outflow. "This had been anticipated. The markets were nervous about it all morning and there's relief it's not worse," said Ravi Bulchandani, head of global currency strategy at Morgan Stanley Dean Witter in London. Brazil's foreign exchange policy has served as the anchor of the country's four-year economic recovery after decades of high inflation. Markets have long considered the real overvalued but feared a devaluation might spark the kind of crisis of confidence among investors that plunged Russia and much of Asia into chaos after they bungled devaluations last year. The dollar dropped more than one percent against the euro in Europe as markets worried about how a full-blown crisis in Latin America's biggest economy would affect the United States, which sends 20 percent of its exports to the region. Franco, a staunch defender of Brazil's previously rigid foreign exchange policies, said he recognised the world's eighth largest economy needed to change its controversial economic policy mix of an overvalued currency and high interest rates. "For some time I have seen the need for flexibility in interest rate policy and foreign exchange," Franco told a news conference after announcing his resignation. He said the Central Bank's Director of Monetary Policy Francisco Lopes would take over at the bank. "The loss of a person like Franco is in itself negative," said Carlos Kawall, chief economist at Citibank in Sao Paulo. "The important things is the confirmation of Francisco Lopes to replace him, which signifies continuity and reduces somewhat the negative impact since he's in the same group." Franco took over control of the Central Bank in August 1997 and had been heavily involved in Brazilian economic policy for several years before that as a director at the bank. His resignation came after a dismal Tuesday that saw nearly $1 billion flood out of Brazil's foreign exchange markets, a level unseen since late last year when only a huge package of international loans prevented a devaluation. Brazil's latest crisis began last week when a rogue state governor announced a 90-day moratorium on debt payments to the central government. While the sums involved were small, the move raised fears a crucial austerity drive could be derailed and that concern snowballed into panic by Tuesday. Brazil's foreign currency reserves are believed to be about $35 billion, not including a first $9 billion tranche of loans freed up by the International Monetary Fund and industrial nations last month. The reserves have plunged from nearly $70 billion before Russia defaulted on its debt in August, a move that roiled the world's financial system and undermined confidence in Brazil, which is saddled with a budget deficit equal to nearly eight percent of gross domestic product. Copyright 1999, Reuters News Service

To: Steve Fancy who wrote (11521)	1/13/1999 10:04:00 AM
From: Steve Fancy	Respond to of 22640

EMERGING MARKETS FX-Brazil sparks general slide Reuters, Wednesday, January 13, 1999 at 08:02 LONDON, Jan 13 (Reuters) - Escalating worries that Brazil may be sliding into political and financial crisis dragged down emerging market currencies around the world on Wednesday, traders and analysts said. But damage was contained as news of an effective mini-devaluation and the resignation of Central Bank President Gustavo Franco relieved mounting tension, they added. "This had been anticipated. The markets were nervous about it all morning and there's relief that it's not worse," said Ravi Bulchandani, head of global currency strategy at Morgan Stanley Dean Witter in London. Brazil's Central Bank on Wednesday abandoned the mini trading band used to control the real's gradual depreciation against the dollar. The currency will now be allowed to trade in its broader maxi-band, shifted on Wednesday to 1.20-1.32 reais per dollar from the 1.12-1.22 reais parameters set a year ago. The real promptly slid to 1.30/1.315 to the dollar on the foreign exchange markets from 1.21 late on Tuesday, and was hovering around that level by late morning in London. Other emerging currencies had already taken a serious knock earlier in the day as nerves over Brazil weighed on markets worldwide, although the latest news from Brasilia did not fuel further panic. Brazil jitters were felt as far away as Asia, amid fears that a major Brazilian devaluation could spark a fresh round of currency turmoil there, although local factors and the stronger overnight dollar were also big influences. Central Europe was also hit, and the Mexican peso, often seen as a proxy for less liquid Latin American units, slid significantly in London trading time. Copyright 1999, Reuters News Service

To: Steve Fancy who wrote (11521)	1/13/1999 10:08:00 AM
From: Steve Fancy	Respond to of 22640

Still going up...in other situations with huge gaps down, TBH has been known to close up. So far I don't know that this is bad news. I've said a 10% devaluation may allow the telco's to move higher. I actually feel somewhat relieved...at least for now. sf