BRAZIL TO DISCUSS YUAN WITH CHINA
Brazilian president Dilma Rousseff will prioritise discussions with China over its currency and trade policies, according to the country’s trade minister Fernando Pimentel. Discussions are expected to occur when the Bric countries meet in April. Pimentel also said that Brazil may consider increasing policies to stem further appreciation of the real against the US dollar. This follows finance minister’s Guido Mantega’s pronouncement of a currency war at the end of last year.
STRONG COMMODITIES BOOST LOONIE
The Canadian dollar – also called the Loonie – is trading near its highest level in almost two and a half years following surging commodity prices. Copper for delivery in three months hit a record high of $9,728 a tonne during London trading and oil managed to hold up above $91 a barrel. The Loonie was trading at US$0.9966 yesterday, having previously traded at US$0.9889, its strongest since the end of May 2008.
CHILE TO ENTER FOREIGN FX MARKET
The Chilean peso slumped 4 per cent against the US dollar yesterday after the government announced plans to buy $12bn in the foreign exchange market in order to weaken the currency. The central bank president Jose De Gregorio said on Monday that $50m would be bought each day between 9 January and 9 February. The peso was the best performing currency in Latin America in 2010 and is currently trading near three-year highs thanks to booming copper prices.
CARRY TRADE LOSSES AT RECORD HIGH
According to UBS, currency traders employing a carry strategy – where they borrow in countries with low interest rates to fund purchases of higher-yielding assets – lost more money in 2010 than at any other point in the last decade. The UBS index shows the strategy lost 2.5 per cent last year as the dollar strengthened. This compares to the 0.98 per cent lost in 2008 when the credit crisis forced many to unwind their carry trades.