Brazil's stocks and currency rose on Monday on prospects that the biggest party in the government coalition was about to defect, weakening President Dilma Rousseff's defense against impeachment proceedings in Congress.

The Brazilian Democratic Movement Party (PMDB), Brazil's largest political party, appears poised to decide on Tuesday to withdraw its support from Rousseff's administration.

Rousseff's impeachment, if it materializes, would put the government in the hands of Vice President Michel Temer, leader of the PMDB, who is reported to be working on policies including sweeping welfare cuts if he comes to power.

"The market sees the PMDB's defection as the beginning of the end for Rousseff's government," said Jose Carlos Amado, a trader with the Spinelli brokerage in Sao Paulo.

Brazil's stocks and currency have rallied as expectations of Rousseff's ouster grew, driving the central bank to act to weaken the real. Many blame the leftist president's economic interventions for pushing Brazil into a deep economic crisis.

On Monday, shares of state-controlled companies such as Petroleo Brasileiro SA and Banco do Brasil SA were among the biggest gainers on Brazil's benchmark stock index.

Shares of Companhia de Saneamento Basico do Estado de Sao Paulo jumped almost 3 percent after the state water utility reported an almost fifteen-fold increase in net profit in the fourth quarter.

The company asked regulators to end discounts to customers who cut their water use amid Brazil's worst draft in decades.

Trading volumes were thin in most Latin American markets after an extended weekend due to Easter holidays.