Nov. 9 (Bloomberg) -- Brazil’s real reached a 14-month high after stocks advanced and the Group of 20 nations remained silent on the U.S. currency’s decline this year and agreed to maintain stimulus measures.

The real gained 1.3 percent to 1.6989 per dollar at 3:07 p.m. New York time, from 1.7202 on Nov. 6. It closed at 1.6775 on Sept. 3, 2008. The real earlier touched 1.6978. The currency strengthened even as the central bank bought dollars at 1.7012 reais each.

“A lot of people thought the central bank would defend the 1.7 barrier and we saw today this isn’t the case,” said Jankiel Santos, chief economist at BES Investimento. “There is no way the real can be stopped in the short term. We are the destination for the world’s capital,” he said in a phone interview from Sao Paulo.

The real is the world’s best-performing major currency this year against the U.S. dollar, with a 36 percent advance. Brazil’s benchmark Bovespa stock index gained 2.7 percent today.

Policy makers from the U.S., U.K., Japan and 17 nations said on Nov. 7 that it’s too early to withdraw spending intended to revive growth. The U.S. unemployment rate increased to 10.2 percent last month, reinforcing speculation the Federal Reserve will keep borrowing costs near zero into next year.

‘Perfect Environment’

The G-20 position “is proof liquidity will remain ample for a while,” said Clive Botelho, chief financial officer at Banco Pine SA, in an interview at Bloomberg’s offices in Sao Paulo. “It is the perfect environment to keep the dollar carry trade.”

In that type of transaction, investors borrow in the U.S. to invest in higher-yielding assets. The basic interest rate in the U.S. is lower than 0.25 percent, compared to 8.75 percent in Brazil.

The main driver for the real is speculation the U.S. will keep rates near zero in the U.S., Andre Perfeito, an economist at Sao Paulo-based Gradual Investimentos, said in a phone interview. The real will end the year at 1.6 per dollar, he said.

Brazil’s economy may grow 4.83 percent in 2010, more than a week-earlier forecast of 4.8 percent, according to the median forecast in a Nov. 6 central bank survey of about 100 economists published today.

Central bank President Henrique Meirelles told Valor Economico there is “euphoria” in the local stock and foreign- exchange markets.

‘Uncontained Enthusiasm’

“When I talk to investors around the world, I start to see an environment of uncontained enthusiasm” about Brazil’s markets, he told the Sao Paulo-based newspaper.

Investors are concerned about the prospect of new government measures to curb gains in the real, said Conrado Garcia, a currency trader at Banco Modal SA. On Oct. 19, Brazil announced a 2 percent tax on foreign purchases of stocks and fixed-income securities. The real has since risen 1.1 percent.

Economists including Silvio Campos Neto at Banco Schahin in Sao Paulo say the measure was effective to establish a 1.7 barrier for the exchange rate.

“If we break 1.7 now but the dollar drops against other currencies as well, there is less chance the government will do something,” said Garcia in a phone interview from Rio de Janeiro. The dollar is down today against all 16 of the most traded currencies tracked by Bloomberg.

“We must learn to live with a stronger exchange rate,” said Vladimir Caramaschi, strategist for Credit Agricole in Brazil. He expects the real to stabilize between 1.6 and 1.65 per dollar in 2010. “Capital inflows are just too strong, there isn’t much the government can do.”

Possible Measures

The government may try “administrative policies” such as allowing the Treasury to join the central bank in foreign- currency intervention and “liberalizing” the real including allowing foreigners to acquire Brazilian securities in foreign currency, JPMorgan Chase & Co. strategist Ben Laidler wrote in a note to clients last week.

In the overnight interest-rates futures market, the yield on the contract due January 2011 rose five basis points, or 0.05 percentage point, to 10.17 percent, according to Bloomberg data.

To contact the reporter responsible for this story: Camila Fontana at cfontana@bloomberg.net

Last Updated: November 9, 2009 15:19 EST