Thursday, March 22, 2012

Brazil gears up for the next round of currency wars

An overly strong local currency has been a structural problem for Brazil -- except, of course, when the real has been too weak for the government's comfort. It looks like the situation is getting ready to reverse again.

From the start of the year to last week, the real surged 8.6% against the dollar, returning to roughly the level the Brazilian currency traded at in late October .

While the real has since given up 2.5% so far in March, it is largely because traders are buzzing that the most recent swing to the upside has gotten the Brazilian government ready to once again raise the currency walls and shut out foreign money.

This time around, the measures on the table include calling in short-term credit lines early, sucking that liquidity out of the market -- and out of foreign traders' clutches. Read More