Brazil: we expect to see a continuation of the currency war in coming months

The Brazilian finance minister Guido Mantega continues to worry about the flood of money coming from Europe and the US and has said Brazil will take more steps to defend its currency. Mr. Mantega was quoted saying "With the situation in Europe under stress, we expect to see a continuation of the currency war in coming months." His comments echo his famous remarks from September which began the chatter about a so-called currency war.

According to the Financial Times, any steps the Brazilians take to curb currency appreciation would not be announced in advance. In the meantime, Brazil’s economy appears to be overheating as growth is expected to come in at 7.5% for the year. The government has taken a number of steps to prevent inflation and slow consumer credit growth including raising reserve requirements and cutting government spending. Interest rate hikes are expected as soon as January.