Brazil warns of currency war
The world is facing a “currency war” as leading governments compete to reduce their exchange rate to solve economic problems, Brazil’s finance minister warns.
“We’re in the midst of an international currency war, a general weakening of currency,” Guido Mantega said Tuesday in Sao Paolo in remarks reported by the Financial Times newspaper. “This threatens us because it takes away our competitiveness.”
His comments follow recent interventions by central banks in Japan, South Korea and Taiwan in an effort to make their currencies cheaper and to improve export competitiveness.
Moreover, the dollar has fallen by about 25 percent so far this year against the Brazilian real. Such devaluation increases the price of Brazilian exports to the US market.
The United States has complained for years that China has held down artificially the value of the Renminbi, preventing it from mounting to reflect the strength of China’s foreign exchange earnings from exporting, notably to the US market.
In recent weeks, feeling has grown on financial markets that the United States, which has already hinted at using World Trade Organization rules to strike back, may see a fall of the dollar as a way of countering the rising pressure.
