Brazilian Finance Minister Guido Mantega said the government will buy all “excess dollars” in the market to curb the real’s appreciation as governments around the world engage in a “currency war.”
Brazil won’t allow the real to appreciate excessively as other countries weaken their currencies to gain market share for exporters, Mantega said today at an event in Sao Paulo.
“We are experiencing a currency war,” Mantega said. “Devaluing currencies artificially is a global strategy.”
The real has gained 35 percent against the U.S. dollar since the beginning of 2009, making Brazilian exports more expensive in dollar terms and cutting into profits for exporters. The comments today echo those Mantega made Sept. 15, when he pledged that Brazil is “not going to lose this game.”
Mantega also said today that 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 currency was little changed today at 1.7106 per U.S. dollar. It has posted gains for six consecutive weeks, the longest winning streak in 11 months.
The yield on Brazil’s interest-rate futures contract due in January 2012 rose 3 basis points, or 0.03 percentage point, to 11.57 percent.
“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 said Sept. 20 it will use its 17.9 billion reais ($10.5 billion) sovereign-wealth fund to buy dollars in the spot market. The fund will be managed by the Treasury and operated by the central bank.