Archive for the ‘BRL FX Policy’ Category

Meirelles Says Cost of Brazil Stability Outweighed by Benefits

March 2, 2010

March 2 (Bloomberg) — Brazilian Central Bank President Henrique Meirelles said maintaining economic stability and higher reserve requirements carry costs.

Meirelles, during a speech in Sao Paulo, said the costs related to more prudential economic managemet were offset by greater stability.

“The costs of stability exist, but the benefits for society are greater,” Meirelles. “In economics, there is no free lunch.”

To contact the reporter on this story: Camila Fontana Correa in Sao Paulo at

To contact the editor responsible for this story: Joshua Goodman at


Brazil Has ‘No Reason’ to Raise Currency Reserves, Freitas Says

December 22, 2009

Dec. 22 (Bloomberg) — Brazil should stop increasing international reserves as the local currency stabilizes and economic growth quickens, former central bank director Carlos Eduardo de Freitas said.

“It’s a totally logical moment for the central bank to stop buying reserves,” Freitas, who was part of the central bank’s monetary policy committee from 1999 to 2003, said in a telephone interview from Brasilia.

Brazil’s real lost 1 percent against the dollar in the fourth quarter, curbing this year’s gain to 30 percent, the best performance among all major currencies tracked by Bloomberg. Freitas said the Brazilian real probably will stabilize around the current level. The real opened little changed at 1.7839 per dollar at 6:02 a.m. in New York, from 1.7846 yesterday.

Foreign currency reserves grew by $32.1 billion this year to $238.9 billion on Dec. 18, according to central bank data. Reserves reached a record $239.45 billion on Dec. 2.

“If they don’t stop buying reserves now they will be paying a high cost for no reason,” Freitas said, referring to the interest rate differential between Brazil and the U.S.

Brazil’s benchmark overnight rate is at a record low of 8.75 percent while the U.S. interest rate is under 0.25 percent. Brazil’s gross domestic product quarterly growth quickened to 1.3 percent in the third quarter from 1.1 percent between March and June, according to the national statistics agency.

Brazil’s policy to increase currency reserves also “lowers investor’s risk artificially,” according to Freitas, now a partner at consulting firm OF Consultoria Economica. “This is very bad for a market economy. Investors take on too much risk and make disastrous decisions.”

To contact the reporter responsible for this story: Camila Fontana in Sao Paulo at

Last Updated: December 22, 2009 06:04 EST

Emerging-Market Controls to Fail, Brown Brothers Says

November 20, 2009

Nov. 20 (Bloomberg) — Emerging-market governments from South Korea to Brazil will fail in their efforts to stem currency rallies by limiting foreign investment, according to Brown Brothers Harriman & Co. and RBC Capital Markets. “Controls can certainly slow the moves but not reverse the gains,” Win Thin, a senior currency strategist at Brown Brothers in New York, said in an interview. Brazil said Nov. 18 it would impose a tax to close a “distortion” caused by last month’s levy on foreign purchases of stocks and bonds aimed at curbing the real’s 34 percent gain this year against the dollar. South Korea, India, Indonesia and Kazakhstan also signaled this week they are considering measures to halt the appreciation of their currencies, which have slowed exports and threaten to undermine their economies. Taiwan’s financial regulator banned foreign investors on Nov. 10 from placing funds in time deposits to curb currency speculation. “These measures have a short-term effect on reducing the pace of the currency appreciation,” Eduardo Suarez, an analyst at RBC in Toronto, said in an interview. “The strengthening of the currencies we’re seeing in many emerging markets is caused by very solid growth expectations, improvement of credit fundamentals and stock exchange gains. I don’t think they can totally stop the appreciation.” [more…]

To contact the reporters on this story: Allen Wan in New York at; Veronica Navarro Espinosa in New York at

Last Updated: November 20, 2009 10:31 EST

Waldemar Jezler

Brazil Can’t Let Markets Dictate Currency, Spence Tells Estado

November 9, 2009

By Camila Fontana

Nov. 9 (Bloomberg) — Michael Spence, former dean of the Stanford University Business School and co-winner of the 2001 Nobel Prize in economics, told O Estado de S. Paulo that Brazil shouldn’t let markets dictate its foreign-exchange rate.

“I don’t think the most sensible thing to do is just to sit and let capital markets, with their history of doing everything wrong, appreciate your currency,” Spence told the newspaper.

To contact the reporter on this story: Camila Fontana Correa in Sao Paulo at

Last Updated: November 9, 2009 05:26 EST