UPDATE 1-Warren Buffett says has been buying Brazilian real

Thu Oct 18, 2007 6:39pm EDT

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(Updates with comments on real investment, analyst comment)

NEW YORK Oct 18 (Reuters) - Billionaire investor Warren Buffett said on Thursday he has been buying the Brazilian real currency, noting that it has doubled in the last five years against the dollar.

Buffett, who is the biggest shareholder of insurance and investment company Berkshire Hathaway Inc (BRKa.N)(BRKb.N), disclosed the stake in an interview on Fox Business Network.

"It's quite unlikely that if you had told me 10 years ago that I would buy the Brazilian real, I would have thought you were crazy," Buffett said.

"In the last five years, the Brazilian currency, in terms of the American currency, has doubled in value," he added.

Buffett once had a bet of more than $21 billion against the U.S. dollar amid concern over mounting U.S. trade and current account deficits.

He pared most of that stake. In May, at Berkshire's annual meeting in Omaha, Nebraska, Buffett told shareholders that Berkshire was betting on one currency, and that it would "surprise" them.

"The surprise is that Buffett made one concentrated large currency bet in an emerging market that may not always be able to cope with his scale on one of those notorious days when the exit door gets clogged," said Alan Ruskin, chief international strategist with RBS Greenwich Capital, in a research note.

Ruskin added that if Buffett made the Brazilian bet around the first quarter and early in the second quarter, he stood to earn a nearly 15 percent return.

At a dinner in Toronto last week, Buffett said it was "very unsettling" that Brazil is now playing a role in supporting the faltering U.S. dollar with its purchases of U.S. Treasuries, the Toronto Star reported on Oct. 13.

Brazil's action would hurt Buffett's real investment because Brazil is trying to weaken its currency and increase the competitiveness of its exports.

The real rose to a seven-year high on Thursday to 1.788 per U.S. dollar after its central bank left interest rates unchanged when investors were expecting a cut. (Reporting by Jonathan Stempel, Kevin Plumberg and Chris Sanders)

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