Brazil's stocks rose early Monday as investors applauded rating agency Standard & Poor's upgrade of the country's sovereign rating late Friday, while the local currency struggled to hang onto recent gains.

The benchmark Bovespa index of the Sao Paulo Stock Exchange was up 1.1 percent at 23,327 points near midday. The index was off earlier highs and traders said it may struggle to stay firmly above the 23,000 point level.

Early gainers included bellwether Tele Norte Leste Participacoes, which was up 2.18 percent to 39.89 reais, and state-run oil giant Petrobras, which was 1.41 ahead at 88.51 reais.

The local currency, the real, weakend slightly to 2.869 reais per U.S. dollar, but traders said pronounced weakening is unlikely.

"We've had a lot of dollar inflows this month and the real is very strong, so this selling will have little impact," said Alessandro Malagutti, a currency trader at the Comex brokerage in Sao Paulo.

Markets are also gaining support from reports over the weekend the government may raise its fiscal surplus targets for this year and next year. The increases would limit inflationary pressures and the potential need for interest rate hikes by the central bank.

It started a tightening cycle last month, raising its base rate by a quarter percentage point to 16.25 percent -- marking the first increase since early 2003.

S&P said the upgrade reflected marked improvement in Brazil's fiscal and trade accounts.The country is currently running a record budget surplus, excluding interest payments, of more than 4.25 percent of gross domestic product, while the trade surplus this year should hit a record $31 billion.

Both factors ease the ability of Brazil to service its external debt load as it tries to attain investment grade status. The latest upgrade followed one by Moody's about two weeks ago. Higher credit ratings make it easier for governments and companies to borrow capital.

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