ft.com > comment > blogs >
Remember me on this computer Sign in
Brazil's new government has said it will do everything it can to stem the appreciation of its currency, the real, and it's just taken another step by moving to discourage short selling of the dollar.
In a statement (in Portuguese) on its website, the central bank said on Thursday that it would introduce reserve requirements for financial institutions with dollar short positions.
Those institutions will be required to lodge a deposit with the central bank that must be equal to 60 per cent of the difference between the size of the short position and either $3bn or the institution's tier one capital, whichever of those two is smaller (and therefore leads to a bigger deposit).
The reserves must be deposited in cash and will not earn interest, Aldo Mendes, monetary policy director, told reporters in Brasilia today, according to Bloomberg.
Short selling the dollar is a means of seeking to profit from a weakening of the US currency against a strengthening real.
The measures, which will come into effect on April 4, could spur dollar purchases and weaken the real, Mendes said.
The central bank said that in December the value of outstanding short dollar positions in the Brazilian foreign exchange market was $16bn.
The real gained 4.6 percent in 2010 and has surged by just over 14 percent from its low last year in May. The gains have made the Brazil's exports more expensive, strangling the competitiveness of the country's manufacturers and causing a surge in cheap imports.
China: newspaper sales flourish
11 for 2011: How should Mexico deal with violence?
© The Financial Times Ltd 2011 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Read Full Article »