Brazil warns of world currency 'war': report

[Letsbereal]

Brazil warns of world currency ‘war’: report
28 September 2010, (AFP)
http://uk.finance.yahoo.com/news/brazil-warns-of-world-currency-war-report-afp-5cb7bb31ea05.html

Excerpt:

The world is in the grip of a currency "war", with leading nations using devaluation to solve economic problems, Brazilian Finance Minister Guido Mantega has warned in remarks reported from Sao Paulo.

"We're in the midst of an international currency war, a general weakening of currency," he said in remarks reported by the Financial Times newspaper.

"This threatens us because it takes away our competitiveness."

Japan, South Korea and Taiwan have intervened recently to pull down the value of their currencies, the newspaper noted, and the dollar has fallen by about 25 percent so far this year against the Brazilian real. Such a fall increases the price of Brazilian exports on the US market.

The remarks are set against a background of increasing tension notably between the United States and China over the value of the yuan.

[Letsbereal]

World gripped by 'international currency war'
28 September 2010, (Guardian.UK)
http://www.guardian.co.uk/business/2010/sep/28/world-in-international-currency-war-warns-brazil

Excerpt:

• Brazilian finance minister Guido Mantega speaks out against devaluations

• Economists fear increasing currency volatility and instability

The world is in the midst of an "international currency war" according to Brazil's finance minister as governments force down the value of their currencies to boost their struggling economies.

The comments are the first public admission made by a senior policymaker about a practice which has become increasingly widespread since the global economic downturn.

Many countries, notably China, have been deliberately weakening their currencies by selling them on foreign exchanges or keeping interest rates artificially low to make their exports cheaper.

Economists fear that such moves are resulting in increasing currency volatility and instability. Increasing competition among individual countries to devalue also makes it harder to mount a co-ordinated policy response to the economic downturn, particularly amid fears of a renewed slowdown.

[Letsbereal]

Capital controls eyed as global currency wars escalate
29 September 2010, by Ambrose Evans-Pritchard (Telegraph.UK)
http://www.telegraph.co.uk/finance/economics/8031203/Capital-controls-eyed-as-global-currency-wars-escalate.html

Excerpt:

Stimulus leaking out of the West's stagnant economies is flooding into emerging markets, playing havoc with their currencies and economies.

Brazil, Mexico, Peru, Colombia, Korea, Taiwan, South Africa, Russia and even Poland are either intervening directly in the exchange markets to prevent their currencies rising too far, or examining what options they have to stem disruptive inflows.

Peter Attard Montalto from Nomura said quantitative easing by the US Federal Reserve and other central banks is incubating serious conflict. "It is forcing money into emerging market bond funds, and to a lesser extent equity funds. There has truly been a wall of money entering many countries," he said.

"I worry that we are on the cusp of a competitive race to the bottom as country after country feels they need to keep up."

Brazil's finance minister Guido Mantega has complained repeatedly over the past month that his country is facing a "currency war" as funds flood the local bond market to take advantage of yields of 11%, vastly higher than anything on offer in the West.

"We're in the midst of an international currency war. This threatens us because it takes away our competitiveness. Advanced countries are seeking to devalue their currencies," he said, pointing the finger at America, Europe and Japan. He is mulling moves to tax short-term debt investments.

Goldman Sachs said net inflows have been running at annual rate of $520 billion (£329 billion) in Asia over the last 15 months, and $74 billion in Latin America. Intervention to stop it creates all kinds of problems so the next step may be "direct capital controls", the bank warned.