UPDATE 1-Brazil's Mantega: Don't expect a currency 'meltdown'

Wed Jan 30, 2013 10:35am EST

* Mantega says real trading at competitive level

* Says gov't to intervene if appreciation is too sharp

BRASILIA Jan 30 (Reuters) - Brazilian Finance Minister Guido Mantega on Wednesday signaled he is comfortable with the recent appreciation of the real, but warned that the government will not allow the currency to strengthen too much, too quickly.

The Brazilian real this week has strengthened past the 2-per-dollar mark for the first time in nearly seven months in an apparent loosening of government efforts to weaken it to help local exporters.

"As long as the exchange fluctuates within a level that keeps local industries competitive, then it can fluctuate," Mantega told reporters in Brasilia.

"We are not changing our currency policy. That policy will not allow the speculative appreciation of the real... don't get your hopes up because we will not change that policy."

He warned investors that the government will not allow a "meltdown" of the exchange rate.

The real added to losses after Mantega's comments, weakening 0.69 percent to 1.9980 per U.S. dollar on Wednesday afternoon.

Most traders and analysts believe that the central bank has allowed the real to appreciate to reduce inflationary pressures at a time when prices are rapidly rising. A stronger real lowers the price of imports.

Mantega dismissed that idea and said exchange rate intervention is not a tool to fight inflation.

He added that an increase in gasoline prices announced on Tuesday should add 0.16 percent to inflation this year.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.