* Emerging market rate hikes expected -official
* Brazil looks set to handle emerging market volatility
* Real, other emerging currencies remain under pressure
By Patricia Duarte
BRASILIA, Jan 29 Brazil's monetary policy is
aimed at curbing inflation and not easing currency volatility, a
member of the government's economic team told Reuters on
Wednesday after a sharp sell-off of emerging market currencies
raised fears of a potential crisis.
Investors have been rattled by worries about the health of
Brazil and other emerging economies that had been growing
rapidly until recently. Central banks from India to South Africa
and Turkey to raise rates to contain the spillover.
"Brazil is at a much better position than others because we
started to adjust our rates early and have high foreign reserves
levels," said the official, who asked for anonymity to speak
The central bank, which has raised its benchmark Selic rate
by 325 basis points since April, will continue to battle high
inflation without shifting its focus to the fluctuations of the
local currency, the official said.
He said rate increases in emerging nations were expected as
the United States reduces the monetary stimulus that flooded
those economies with foreign capital.
Brazil's real and other emerging market currencies were back
under pressure on Wednesday as expectations the U.S. Federal
Reserve will press on with stimulus cuts later in the day
reheated doubts over developing markets' appeal for investors.
The real weakened nearly 0.4 percent to 2.43 per dollar on
The official said the market may be pushing the real too low
and that could bring in sellers and halt the depreciation. The
source did not say if the central bank could increase forex
interventions to ease the real's depreciation.
"My vision is not pessimistic. In the short to medium term
the outlook will remain challenging. But if the recovery in the
United States and Europe materializes then I believe the
situation will normalize," the official said.