UPDATE 1-Brazil cbanker: G20 likely to discuss asset bubbles
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By Jeremy Gaunt, European Investment Correspondent
OXFORD, England, Nov 3 (Reuters) - The president of Brazil's central bank said on Tuesday that the G20 was likely to discuss ways of combating asset bubbles and other imbalances at its meeting in Scotland this weekend.
Brazil imposed a tax of 2 percent on foreign purchases of domestic stocks and bonds last month in an attempt to discourage inflows that have pushed up the Brazilian real (BRBY), threatening exports.
Henrique Meirelles, the central bank president, said countries needed to come together to find ways of dealing with speculative capital.
"There is a need for international cooperation to prevent imbalance- and bubble-building," he said after a speech in the English university town of Oxford. "I am sure this will be an issue for the G20.
Emerging markets have attracted large amounts of capital as the world economy bounces back from the worst financial crisis in decades, in part driven by massive liquidity injections by central banks around the world.
Meirelles would not comment on whether Brazil's tax on foreign purchases of domestic stocks and bonds would discourage inflows or is large enough for the purpose.
Brazil's stock market .BVSP, as well as the real, has rallied along with foreign inflows.
But Meirelles did say that the carry trade, in which investors borrow in low-yielding currencies in order to buy assets in higher yielding ones, was not currently a problem for the real.
"The carry trade at this point is not relevant. It might become so sometime," he said.
Capital flows into Brazil were currently aimed at foreign direct investment and the stock market, he said, rather than at simple carry.
Meirelles confirmed that the central bank was working on an overhaul of its currency laws, which were set up in the 1930s when hard currencies were scarce.
The laws are seen as making it harder for citizens and companies to sell excess dollars [ID:nN31445258]. (Editing by Leslie Adler)
