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Brazil stocks teeter
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January 22, 1999: 10:37 a.m. ET
Bovespa droops again amid pressure on Brazilian real, despite fiscal reform plans
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NEW YORK (CNNfn) - With investor focus worldwide fixed on an unsettled Brazil, Sao Paulo's main stock index trickled lower at midday Friday after the Central Bank stepped in to stem a tumble in the Brazilian currency.
The Bovespa index shed 3.3 percent, losing 242 points to 7,079 in the wake of Thursday's 4.6 percent plunge.
That came shortly after the Banco do Brasil, the government-controlled bank, backed off its pledge last week to allow Brazil's currency, the real, to float freely against the U.S. dollar.
As the real opened lower Friday, sinking as low as 1.73 to the dollar, the CenBank said it had begun to bolster the embattled currency in foreign exchange markets.
But that move turned out to be a short-lived palliative, as the real spiked up to 1.65 to the dollar, only to fall back. The real was recently quoted at 1.68 to the U.S. greenback.
Many analysts expect the troubles in the Brazilian stock market are going to mirror the weakness in the real, at least in the immediate term.
"Brazil is caught in a combination of its own policy mistakes and powerful market forces," said Marc Chandler, senior currency analyst at Independent Global Market Advisor. He said the recent passage of pension reforms by the Brazilian legislature has been enough to stem the tide of real selling.
"Even though Brazil has been taking some important steps on the fiscal front, the market is afraid right now that the interest rates Brazil has to raise in order to slow down the real's depreciation are going to offset that fiscal improvement," he said. 
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