Brazil's stocks fall, real gains on tame inflation

SAO PAULO, March 12 (Reuters) - Brazil's stocks fell on Monday while its currency edged higher on optimism the country's tame inflation rate and healthy economic fundamentals will help fuel foreign direct investment.

The Bovespa index .BVSP of the Sao Paulo Stock Exchange lost 0.4 percent to 43,962.41 points as investors eyed the effect of subprime mortgage lenders on equity markets in the United States.

The Brazilian real BRBY strengthened 0.19 percent to 2.095 per U.S. dollar.

Economists trimmed their estimate for Brazil's benchmark IPCA inflation index for a sixth straight week to 3.87 percent from 3.88 percent a week ago, the central bank said in its weekly survey of market participants on Monday.

The tame inflation expectations helped fuel optimism over the country's economic fundamentals.

"The mood is very favorable, after the (weekly) market report once again showing a decline in inflation," said Marcelo Voss, chief economist of the Liquidez brokerage.

Voss expects the real to stay strong, though it likely will not gain beyond 2.08 per dollar as the central bank is likely to intensify its intervention on the spot foreign exchange market should it get close to that level.

On the stock market, state-controlled Petrobras (PETR4.SA), the heaviest stock in the Bovespa index, fell 1.3 percent to 41.98 reais, tracking a drop in international crude oil prices. Crude prices slumped 2.2 percent in New York, while prices in London fell 1.4 percent over expectations OPEC will not trim oil output when it meets this week even as supplies in the United States have been plentiful.