As Brazil Buys More Dollars, Country Demands IMF Create An FX-Manipulation Index
The chart below from Reuters shows the recent timeline in Brazil's escalating attempts to prevent the surging BRL, and its increasing militancy vis-a-vis Ben Bernanke's printer. What is not shown on the chart is the nearly daily dollar buying intervention by the Brazil CB, of which one was announced literally minutes ago. Brazil's Finance Minister was the first person to call the current FX regime for what it is: an international currency war. Brazil also defected, literally, from the useless G-20 meeting last weekend in another indication it has had enough with the Fed's manipulative ways. And today, Brazil, which is so far proving to be the most vocal opponent to the dollar debasement QE2 strategy by the Fed, has announed that it will propose at the Group of 20 nations meeting
next month that the International Monetary Fund create an index
measuring currency manipulation. The idea is to identify who is keeping their currency
artificially low to boost exports, Mantega said, lending
support to eventual actions against illegal subsidies at the
World Trade Organization. "The IMF would have to come up with a method to measure
which currencies reflect the structural situation of their
countries, which are floating currencies, and which ones are
forcing their hand," Mantega told O Globo newspaper in an
interview. Um, it is pretty simple who is (and will be) manipulating their currencies the most: exhibit A, Goldman's suggestion that the dollar is headed far lower.
More from Reuters:
The next step would be to make a deal to reduce such intervention, and if that didn't happen the manipulation could eventually be considered a commercial subsidy, Mantega said.
"In fact, the WTO considers currency manipulation to be a commercial subsidy that has to be avoided and could result in sanctions", he said.
Many countries are already taking measures to devalue their currencies, Mantega said, highlighting Japan and South Korea. An IMF index would bring greater transparency, he added.
Brazilian officials have been at the forefront of a global battle on currency intervention, criticizing the monetary policy of advanced countries while taking measures at home to halt the rise of the real BRBY.
Over the past month, Brazil tripled a tax on foreign investment in local bonds, closed a series of loopholes to make the tax more effective and raised a tax on the collateral investors must put down to trade in the futures market.