FX Wars Escalate: Brazil Cancels Participation In Upcoming G20 Meeting

The latest currency war escalation does not come from any of the usual suspects (the Fed-PBoC-BOJ-ECB-SNB hate pentagongram) but from non-axis player Brazil. And it's a doozy - the country's top economic officials have decided to cancel their trip to Seoul in what is likely the first jarring demonstrating of defection from the G-20 cartel. The reason for this last minute defection from the Central Banking proletariat , as given by Finance Minister Guido Mantega and cited by Reuters, is, appropriately enough: "currency issues." Nuff said. And while Mantega has decided to pay a last minute cancellation fee, he is not alone - the president of the central bank Henrique Meirelles has also withdrawn from the list of attendees, due the totally unforeseeable event of monetary policy meetings to be held on Tuesday and Wednesday. Obviously those were unheard of when the G-20 was scheduling the time and date of its location. Next up on defection watch: Hildebrand and Shirakawa. It will go oddly elegant in addition to the (FX) suicide watch they have been on for about a week.

From Reuters:

Brazil's top economic officials will not be attending meetings of Group of 20 finance ministers and central bank governors in South Korea this week, the finance ministry and central bank press offices said on Monday.

Finance Minister Guido Mantega canceled his trip because of currency issues, the press office confirmed, adding that he had just come back from an international trip and would be accompanying President Luiz Inacio Lula da Silva to the Group of 20 leaders meeting next month.

Reuters reported on Friday that Mantega would not be attending the meeting and would unveil new currency measures aimed at containing a rapid rise in the real BRBY this week. For more see [ID:nN15261854].

Central Bank President Henrique Meirelles will also not be attending the G20 this week because the bank holds its monetary policy meeting on Tuesday and Wednesday, the press office of the central bank said.

Latin America's largest economy has sought to project itself onto the international stage in recent years, and the G20 has been an important forum for its increasing clout as a major emerging market.

Brazil also holds presidential run-off elections on Oct. 31.

And just in case there was any confusion what the real reason for the last minute no show is, we also learn from Reuters that in an attempt to prevent the ongoing surge of the real, Brazil has raised the tax it charges foreigners on local purchases from 4% to 6%.

Brazil will raise the tax it charges foriegners to buy local bonds to 6 percent from 4 percent currently, Finance Minister Guido Mantega said on Monday.

The move is aimed to help curb a recent rally by the local currency, the real BRBY.

In other news, Brazil did not buy dollars today. We are not so sure about Peru or the other 20 countries which are now engaged in FX crossfire.