7 Jun 2013
Flash: Brazil is stepping up its defences against market volatility - BBH
FXstreet.com (Barcelona) - Brown Brothers Harriman analysts note that Brazil is stepping up its defences against market volatility.
They add that Finance Minister Mantega announced Wednesday the lowering of IOF tax on foreign investments in local fixed income markets from 6% to 0% and the tax was introduced in 2011 when the real was under pressure to appreciate. They add that now both the Finance Ministry and the central bank (via swaps) are together trying to (A) slow down further BRL depreciation and/or (B) cap the move at 2.15. They write, “Their intention is not yet clear, and we may never know. Still, we think their commitment (and capability) is strong enough to help BRL outperform other EM currencies in periods of broad dollar strength.”
They add that Finance Minister Mantega announced Wednesday the lowering of IOF tax on foreign investments in local fixed income markets from 6% to 0% and the tax was introduced in 2011 when the real was under pressure to appreciate. They add that now both the Finance Ministry and the central bank (via swaps) are together trying to (A) slow down further BRL depreciation and/or (B) cap the move at 2.15. They write, “Their intention is not yet clear, and we may never know. Still, we think their commitment (and capability) is strong enough to help BRL outperform other EM currencies in periods of broad dollar strength.”