Thread: Brazil Confirms What Everyone Knows: "A Currency War Has Broken Out"

Brazil Confirms What Everyone Knows: "A Currency War Has Broken Out"
http://www.zerohedge.com/article/bra...has-broken-out

From the FT: "An “international currency war” has broken out, according to Guido Mantega, Brazil’s finance minister, as governments around the globe compete to lower their exchange rates to boost competitiveness." Welcome to the new frontline. It is being played out at every 500x levered FX trade station. No prisoners are taken as those wounded are immediately shot. And the incursions have now entered stocks and bonds. Trading any assets is now retaliation against a central bank somewhere (most typically at Liberty 33 or at the Marriner Eccles building) which is engaged in open warfare against the world's middle class. And yes, the Brazil Central Bank earlier announced that it was heading unto the breach, buying yet more dollars for 1.7094 reais at auction, and has bought as much as $1 billion USD each day for the past two weeks, putting the Japanese intervention from two weeks ago to shame.

From the FT:

Mr Mantega’s comments in São Paulo on Monday follow a series of recent interventions by central banks, in Japan, South Korea and Taiwan in an effort to make their currencies cheaper. China, an export powerhouse, has continued to suppress the value of the renminbi, in spite of pressure from the US to allow it to rise, while officials from countries ranging from Singapore to Colombia have issued warnings over the strength of their currencies.

“We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness,” Mr Mantega said. By publicly asserting the existence of a “currency war”, Mr Mantega has admitted what many policymakers have been saying in private: a rising number of countries see a weaker exchange rate as a way to lift their economies.

A weaker exchange rate makes a country’s exports cheaper, potentially boosting a key source of growth for economies battling to find growth as they emerge from the global downturn.

The proliferation of countries trying to manage their exchange rates down is also making it difficult to co-ordinate the issue in global economic forums.

In spite of Mr Mantega’s recent aggressive public statements, however, Brazil has so far held back from taking any action other than intervening in the local currency spot market.

The central bank bought as much as $1bn a day for much of the past two weeks – about 10 times its daily average in recent months – but this was largely to absorb money entering the country to take part in last week’s $67bn share issue by Petrobras, the national oil company.
We feel sad for the central banks, who apparently don't realize that in this war of attrition there are no losers, and the final outcome is the end of Keynesianism. We hope someone promptly discovers the FX equivalent of the nuke, and a global exchange occurs, as we, for one, can't wait for this most destructive experiment in economic fundamentalism to end already.

Rupee Rises to Four-Month High as Foreigners Step Up India Stock Purchases
http://www.bloomberg.com/news/2010-0...purchases.html

India’s rupee climbed to its strongest level in more than four months after overseas investors stepped up purchases of local equities, seeking to profit from growth in Asia’s third-largest economy.

The currency has appreciated on all but three days this month as foreigners’ average net purchases of India’s equities more than doubled. The benchmark Bombay Stock Exchange’s Sensitive Index rose, completing its best close since January 2008.

“Investors are certain about the rupee’s direction,” said Naveen Raghuvanshi, a currency trader at Development Credit Bank Ltd. in Mumbai. “The capital inflows we are seeing are driven more by fundamentals at the moment.”

The rupee appreciated 0.5 percent to 45.0150 per dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. It earlier touched 44.9950, the strongest level since May 13.

The rupee has strengthened 4.6 percent this month, the best performance among Asia’s 10 most-used currencies, as foreigners bought $4.5 billion more local equities than they sold through Sept. 23.

India’s $1.3 trillion economy grew 8.8 percent last quarter from a year earlier, the fastest pace of expansion among major economies after China and Brazil, a report showed Aug. 31.

Canada's Dollar May Mimic Peso Gain Versus Greenback: Technical Analysis
http://www.bloomberg.com/news/2010-0...-analysis.html

Canada’s dollar may follow the Mexican peso higher against the U.S. currency, approaching a record set in 2007, according to Citigroup Inc.

The Canadian currency is headed toward 99.31 cents per U.S. dollar, a level last reached on April 21, Tom Fitzpatrick and Alex Good in New York and Shyam Devani in London, Citigroup technical analysts, wrote in a note to clients today. It may keep gaining to 90.59 cents as crude oil rises, they wrote. The currency touched a record 90.58 cents on Nov. 7, 2007.

“We have had three tests of the C$1.1110 to C$1.0140 area and held, but the fourth could be a charm,” the analysts wrote, citing the three times the Canadian dollar appreciated to that level versus the greenback without gaining further. Fitzpatrick didn’t immediately return a call seeking comment. Good and Devani declined to comment.

Mexico’s currency broke below the U.S. dollar support level and has gained 2.1 percent in the past five days, versus a 0.2 percent advance for the Canadian dollar. The loonie is poised to catch up because crude oil may climb to $100 a barrel as weekly averages “have converged to a point that suggests a strong impulsive move may not be far away,” the analysts wrote. Crude is Canada’s biggest export.

The Canadian dollar traded on a one-for-one basis with the greenback on April 6 for the first time in almost two years. It was down 0.4 percent today to C$1.0284 per U.S. dollar. Crude oil for November delivery was at $75.56 a barrel in New York.

Technical analysts study charts of trading patterns to forecast price changes. Support is a level on a chart where buy orders may be clustered.

Impact of a Strong Malaysian Ringgit
http://www.cnbc.com/id/15840232?video=1600970300&play=1

Airtime: Sun. Sept. 26 2010 | light e) ET
The Malaysian ringgit is at a 13-year high against the dollar. Dato Seri Ahmad Husni Hanadzlah, second finance minister of Malaysia, tells CNBC's Martin Soong & Bernard Lo how the strong ringgit is affecting businesses and investments in the country.