The challenge for the Brazilian government is to defend the real without driving up inflation, Trade Minister Fernando Pimentel said.
The government can’t intervene on the currency “too aggressively because it could affect inflation,” he told reporters in Brasilia today.
President Dilma Rousseff has condemned the loose monetary policy of the U.S. and Europe, saying in a speech in Germany on March 5 that it was forcing a “monetary tsunami” on Brazil. European and U.S. investors seeking higher returns have been buying Brazilian bonds. The influx of foreign capital has strengthened the real, which reached a 12-year high against the dollar last year.
The currency was the biggest gainer of 16 major currencies tracked by Bloomberg in the first two months of this year, and the biggest faller this month.
The real declined 0.2 percent to 1.8223 against the U.S. currency as of 11:15 a.m. in Brasilia.
Annual inflation eased to 5.61 percent through mid-March, the slowest pace since 2010. The central bank targets inflation of 4.5 percent, plus or minus two percentage points.
Finance Minister Guido Mantega has said Brazil has an “infinite arsenal” of measures it may use against investors driving up the real.
The government would prefer a Latin American candidate for the post of World Bank president, Pimentel also said today.