Brazil stocks fall to 3-month low, real weakens

(Updates to close)

SAO PAULO, July 1 (Reuters) - Brazilian stocks fell to the weakest level in almost three months on Tuesday, as a slide in Banco do Brasil and mining company Vale dragged markets lower, while the national currency weakened as investors' risk aversion grew.

The Sao Paulo Stock Exchange's benchmark Bovespa index .BVSP fell 2.5 percent to 63,396.19 points, its lowest close since April 15.

Banco do Brasil shares tumbled nearly 6 percent on expectations it may issue new shares after the government cleared the way for foreign investors to double their stake in the bank.

Shares of Gol Linhas Aereas and TAM Linhas Aereas, Brazil's two largest airlines, also sank on concerns slower air travel demand and record high oil prices will reduce the companies' margins.

Brazil's currency, the real BRBY, weakened 0.5 percent to 1.605 per U.S. dollar as investors sold riskier emerging market securities in search of greenbacks.

"The market is looking for some hedge," said Milton Mota, a trader at the SLW brokerage, adding that the real may continue to trade under pressure, in tandem with overseas markets.

Interest rate futures <0#DIJ:> firmed on the BM&F commodities and futures exchange in Sao Paulo, a sign of the sour mood in Brazilian markets.

Mining company Vale (VALE5.SA: Quote, Profile, Research), the second-heaviest stock in the Bovespa index, sank 3.5 percent to 46.04 reais, its lowest level in more than three months, as investors sold off liquid Brazilian equities.