* AUGUST 6, 2010, 1:40 P.M. ET
Brazil's Mantega: Government Monitoring Real's Rise -Estado
BRASILIA (Dow Jones)--Brazil's government is carefully monitoring the appreciation of the local currency, the real, and will take steps to curb excesses if necessary, Finance Minister Guido Mantega said Friday, according to the Estado news agency.
Speaking at an event in Rio de Janeiro, Mantega said that in his opinion the currency appeared to be slightly over-valued.
"The real has appreciated over time but we're not going to allow exaggeration," he said. "We need to allow for a certain appreciation, but we seek to inhibit abuses."
Brazil's currency has strengthened by about 5% over the past 12 months to near BRL1.76 to the dollar, but has remained close to the trading range it had at the beginning of this year.
According to recent central bank projections, however, the country's current account deficit is expected to widen to nearly $50 billion this year from $24 billion in 2009 due to currency appreciation and a weakened foreign trade balance.
Brazil's government in July hinted it could re-introduce auctions of reverse swap contracts to discourage appreciation of the real. The auctions allow investors to exchange paper linked to variations in the Brazilian real's movements against the U.S. dollar for government paper linked to interest rates.
Separately Friday, Mantega said he's content with the trajectory of inflation, which has slowed sharply over recent months.
"We should end the year with inflation under control and perhaps the highest growth rate seen in the country's recent history," he said.
Brazil's IBGE statistics institute Friday reported July IPCA consumer price inflation at 0.01%. The result represented the second consecutive month of stagnant inflation in the country and brought the 12-month IPCA rate to 4.6%.
The government has set year-end targets for the IPCA at 4.5% for 2010 and 2011.
Brazil's Mantega: Government Monitoring Real's Rise -Estado
BRASILIA (Dow Jones)--Brazil's government is carefully monitoring the appreciation of the local currency, the real, and will take steps to curb excesses if necessary, Finance Minister Guido Mantega said Friday, according to the Estado news agency.
Speaking at an event in Rio de Janeiro, Mantega said that in his opinion the currency appeared to be slightly over-valued.
"The real has appreciated over time but we're not going to allow exaggeration," he said. "We need to allow for a certain appreciation, but we seek to inhibit abuses."
Brazil's currency has strengthened by about 5% over the past 12 months to near BRL1.76 to the dollar, but has remained close to the trading range it had at the beginning of this year.
According to recent central bank projections, however, the country's current account deficit is expected to widen to nearly $50 billion this year from $24 billion in 2009 due to currency appreciation and a weakened foreign trade balance.
Brazil's government in July hinted it could re-introduce auctions of reverse swap contracts to discourage appreciation of the real. The auctions allow investors to exchange paper linked to variations in the Brazilian real's movements against the U.S. dollar for government paper linked to interest rates.
Separately Friday, Mantega said he's content with the trajectory of inflation, which has slowed sharply over recent months.
"We should end the year with inflation under control and perhaps the highest growth rate seen in the country's recent history," he said.
Brazil's IBGE statistics institute Friday reported July IPCA consumer price inflation at 0.01%. The result represented the second consecutive month of stagnant inflation in the country and brought the 12-month IPCA rate to 4.6%.
The government has set year-end targets for the IPCA at 4.5% for 2010 and 2011.