Brazil Vows to Fight World’s Currency War Buying Excess Dollar in the Market

Dollar Guido Mantega, Brazil’s Finance Minister claims that an “international currency war” has broken out adding, however, that the Brazilian government will buy all “excess dollars” in the market to curb the appreciation of the local currency real.

Brazil won’t allow the real to appreciate excessively as other countries weaken their currencies to gain market share for exporters, Mantega said Tuesday during a business event in São Paulo.

“We are experiencing a currency war,” Mantega said. “Devaluing currencies artificially is a global strategy”.

A weaker exchange rate makes a country’s exports cheaper helping to boost the economy out of the global downturn. However the problem is when the policy proliferates it makes it most difficult to co-ordinate the issue globally.

The real has gained 35% against the US dollar since the beginning of 2009, making Brazilian exports more expensive in dollar terms and cutting into profits for exporters.

The comments echo Mantega’s words last September 15, when he pledged that Brazil is “not going to lose this game.”

The Brazilian official comments coincide with the latest interventions in Asia where South Korea, Taiwan and Japan have intervened in money markets in an effort to make their currencies cheaper.

South Korea that is hosting next November the G-20 is reluctant to include the issue in the agenda given the position of neighboring China and Beijing’s Yuan policy criticized by the US. China is South Korea’s main partner and the world’s second largest economy.

Mantega reiterated Brazil is considering new taxes on short-term, fixed-income investments, without providing details. Brazil doesn’t plan to tax long-term investments, he said.

“The Brazilian government has an arsenal of instruments to cope with the situation and will not let the real strengthen too much and much less suffer harming effects from other countries’ exchange rate policies”, warned Mantega.

However the currency was little changed at 1.7106 per U.S. dollar. It has posted gains for six consecutive weeks, the longest winning streak in 11 months.

“We’re already buying a bigger volume of currency – we’ll keep buying,” Mantega told reporters. “We’ll buy any excess dollars in the market.”

Last week, central bank President Henrique Meirelles said his institution is prepared to buy or sell dollars in the foreign exchange market to manage liquidity levels, adding that excessive capital inflows represent an “important risk” throughout the global economy.

Brazil announced last week it will use its 17.9 billion real (10.5 billion USD) sovereign-wealth fund to buy dollars in the spot market. The fund will be managed by the Treasury and operated by the central bank.

Brazil has been flooded by greenbacks lately, as much as one billion dollars a day over the past weeks (ten times normal activity) attracted by the country’s oil and gas corporation Petrobras shares issue, which totaled 67 billion US dollars.

Mercopress

Tags:

Ads

You May Also Like

For Brazil Justice Caving In to FIFA’s Demands Means to Issue a Banana Republic Certificate

Brazil’s Supreme Court (STF) is against the proposals made by Soccer’s International Federation, FIFA, ...

Lula’s Reason to Get Back to His Hectic Agenda: “The Boss’s Eye Fattens the Pig”

The president of Brazil, Luiz Inácio Lula da Silva said Saturday he is in ...

Brazilian President Visits UK. End of Farm Subsidies in the Agenda.

Brazilian President Luiz Inácio Lula da Silva will be in the United Kingdom between ...

Brazil Sounds Alarm: If Dollar Keeps Falling We’re Ruined

Guido Mantega, the Minister of Economy of Brazil warned this Tuesday, August 5, that ...

2008 Predictions: Barack Becomes US President and Brazil Stocks Boom

Among predictions for 2008 made by Pequot Capital Chief Investment Strategist, Byron R. Wien, ...

UnaSur, the South America Union, Is Born Today in Brazil

Leaders of South America are scheduled to meet this Friday, May 23, in Brazil ...

Brazil Teaches Guatemala Zero Hunger

Half of Guatemala’s children, nearly 2 million of them, suffer from chronic malnutrition. This ...

Brazilians facing delays in airport

Brazilians Start to Stand Up for Their Rights

Brazilians often seem passive in the face of injustice and reluctant to take direct ...

Brazilian singer Emilinha Borba

Brazil Loses Emilinha, an Idol from the 1940s, Who Never Left the Limelight

Brazilian legendary singer from the 1940s and 1950s, Emilinha Borba, died Monday, September 3, ...

Brazilian Congress Ponders About Abolishing Secret Vote

The president of Brazil’s Chamber of Deputies, Aldo Rebelo (Partido Comunista do Brasil, São ...