Brazil to curb currency speculation

Brazil is set to impose another measure to curb the appreciation of its currency real against the dollar, thus preventing speculative money from flooding into the economy. According to a Bloomberg report,

The new rules have the potential to reduce short positions in the dollar to $10 billion from $16.8 billion in December as banks seek to avoid paying reserve requirements on currency operations, Aldo Mendes, the central bank's director of monetary policy told reporters in Brasilia.

Starting April 4, Brazilian banks will need to deposit in cash at the central bank 60 percent of their short positions in U.S. dollars above $3 billion or their capital base, whichever is smaller. The reserves will not earn interest, Mendes said.

Brazil's move is quite understandable given the recent steep rise of the currency. In fact, according to the BIS, Brazil's real exchange rates have increased 33% in the last two years, the third biggest gain among all 58 countries which the BIS covers in the broad effective exchange rates data.

It's excessively odd that China, the fastest growing economy in the world, has one of the weakest currencies of all.