Is Brazil faking the currency war?

Jonathan Wheatley – Financial Times, 03/22/2012

Is the currency war over? It may be, if you believe a fascinating analysis by Mike Dolan of Reuters published on Wednesday. He floats the idea that the renminbi may have peaked and could soon depreciate, bringing other EM currencies down with it.

Unthinkable stuff, to many. But it does make you wonder why Brazil, the world’s chief currency warmonger, has chosen this moment to escalate the conflict, when its own currency is some way off its peak and quantitative easing in the developed world seems to be on hold or at an end.

It’s easy to understand why Brazil launched its currency war in September 2010. From late 2002 the real made enormous gains against the US dollar, making Brazilian exports much more expensive and foreign imports much cheaper. The collapse of Lehman Brothers brought some relief but by late 2010 the real was up against pre-crisis levels.

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