Brazilian Real Strengthens After S&P Ratings Decision; Shares Decline

 By Jeffrey T. Lewis 

SAO PAULO--The Brazilian real strengthened Tuesday after S&P affirmed the country's investment-grade credit rating, and Brazilian shares fell.

The Ibovespa stocks index fell 0.8% to 51506 points, led by airline Gol. The real exited active trading at 3.1253 to the dollar, according to Tullett Prebon via FactSet, after closing at 3.1601 on Monday. Tuesday=92s was the strongest close for the real in almost two weeks.

Standard & Poor's Ratings Services said Monday after the close of active trading that it maintained its ratings for Brazil's credit with a stable outlook.

The ratings company praised President Dilma Rousseff's plans to improve her government's fiscal situation and to restore lost credibility, and said it expects that the president and Brazil's Congress will continue to support the "politically challenging policy correction underway."

The real was also helped by comments Tuesday from the president of Brazil's central bank, Alexandre Tombini, who said the bank sees no reason to stop its program of regular auctions of currency-swap contracts.

The contracts provide companies with a way to protect themselves from swings in the currency. The bank started the auction program in 2013 and has extended it repeatedly, most recently through March 31. Mr. Tombini didn't provide any details on another extension to the program.

In Brazil's stock market, Gol Linhas Aereas Inteligentes (GOLL4.BR, GOL) had the biggest decline in the Ibovespa index, with a drop of 4.3% to 8.85 reais. Iron-mining giant Vale (VALE, VALE3.BR)retreated 3.9% to 19.58 reais, the second-biggest decline in the index.

Real-estate developer PDG Realty (PDGR3.BR) had the biggest gain, with rise of 4.3% to 0.49 real.

Write to Jeffrey T. Lewis at [e-mail]