UPDATE 1-Brazil has 'ammunition' to combat global turmoil, Rousseff says
SAO PAULO Aug 28 (Reuters) - The Brazilian economy has enough firepower to stem the impact of global market turmoil, President Dilma Rousseff said on Wednesday, in an attempt to reinforce confidence in the nation's currency.
Rousseff blamed the recent slump in the real, Brazil's currency, on expectations that the U.S. Federal Reserve is on its way to tightening monetary policy. She said Brazil has "large international reserves," which she suggested were "ammunition" that could help ease market volatility.
"Do you know that old story about keeping your money beneath your mattress? Well, Brazil doesn't but it does have between $378 billion and $372 billion in international reserves," she told radio stations in the city of Belo Horizonte in an interview. "We have what is called 'ammunition' to deal with those global situations."
Investors are questioning Rousseff's economic policy, saying it has made the country more vulnerable to rising debt and inflation, state interference in some sectors and a weaker real. The government has defended its stance by saying policies - such as ample tax breaks and loan disbursements from state-run banks to aid the industry - are cushioning Brazil from global turmoil.
The real, along with India's rupee, has weakened more than any other major currency since May. Its tumble of over 15 percent is forcing businesses, policymakers and consumers to prepare for consequences, including inflation and a costlier fundraising.
The decline has become another symbol of Brazil's fall from grace among investors and produced a severe case of whiplash among producers, who complain that the basic pillars of Latin America's largest economy have constantly shifted under Rousseff's left-leaning government.
Rousseff reiterated that the government is neither targeting any level nor a direction for the currency. "Our policy is one of a flexible currency," she said in the interview.
The currency strengthened 0.6 percent to 2.358 to the dollar in late morning trading, running counter to global markets.
In an effort to shore up the real and stem volatility, Brazil's central bank last Thursday said it would intervene in foreign exchange markets with daily cash and currency swaps valued at $60 billion by the end of the year.
The central bank's monetary policy committee, known as Copom, is widely expected to deliver another half a percentage point hike in interest rates on Wednesday.
Brazil's low growth in her 2 1/2-year tenure as president has been the result of a slow global expansion, Rousseff said, adding that Brazil's public finances remain "very good."
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