Oct. 27 (Bloomberg) -- Brazil's real strengthened on speculation the central bank's efforts to shore up the currency will mitigate investor aversion to higher-yielding assets.

Banco Central do Brasil sold 16,750 currency swaps out of 30,000 contracts offered at an auction today. The bank also bought $1.25 billion worth of reais with an agreement to resell the currency at a future date.

``The central bank moves are tempering some of the speculative impetus of investors betting against the real,'' said Jorge Knauer, manager of the foreign-exchange trading desk at Rio de Janeiro-based Banco Prosper SA. ``But the market has no parameters, so this improvement in sentiment will probably be short-lived.''

The real rose 2.5 percent to 2.2506 per dollar at 4:29 p.m. New York time, from 2.3075 on Oct. 24. Brazil's currency has plunged about 30 percent from a nine-year high of 1.5545 per dollar on Aug. 1.

The central bank will draw further on its $204.9 billion of international reserves to sell dollars in the spot market, Knauer said.

``Emerging markets, especially with better fundamentals, might decouple from equities,'' said Gerardo Margolis, a vice president for emerging markets at TD Securities Inc. in Toronto. ``Measures from the central bank are starting to pay off.''

Brazilian Stocks

Brazilian stocks fell to the lowest level in almost three years on concern the credit crisis and the worst month for commodity prices in at least 38 years will reduce corporate earnings. The Bovespa index fell 6.5 percent today.

Emerging-market stocks slumped to a four-year low as Ukraine and Hungary became the latest countries to receive help from the International Monetary Fund.

Yields on Brazil's local-currency bonds and rate futures contracts fell on speculation the central bank will halt six months of interest-rate increases as the global credit crisis slows Latin America's biggest economy.

The central bank will keep the benchmark overnight rate at 13.75 percent at its meeting this week, according to the median forecast of 41 economists surveyed by Bloomberg News. Some analysts expected the central bank to raise the rate for a fifth straight time since April.

Economists in a weekly central bank survey predict the central bank will raise the benchmark rate to 14 percent this week, compared with last week's forecast for a half-point increase to 14.25 percent. The survey, taken Oct. 24, included about 100 economists and was published today.

The yield on Brazil's overnight futures contract for January 2009 delivery dropped 38 basis points, or 0.38 percentage point, to 14.05 percent. The yield on Brazil's zero- coupon bond due in January 2010 fell 4 basis points to 16.62 percent, according to Banco Votorantim.

To contact the reporters on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net; Jamie McGee in New York at jmcgee8@bloomberg.net

Last Updated: October 27, 2008 16:40 EDT