Brazil's Real

This morning the Brazilian Real dipped under 1.60 to the US dollar for the first time since the 08 crisis (right now 1.595) and looks like making all-time highs against the greenback in short order. It also cocked a snook at Brazil's FinMin Guido Mantega, who just yesterday rolled out the latest set of controls on foreign capitals flowing in to Brazil that was supposed to stem the tide. Here's Merco Press News with a straightforward and decent report on the whole issue and here's an excerpt of the top paragraphs designed to get you to click through and read more:

Underscoring the urgency in senior levels in the Brazilian government to tackle the rising Real, during a prime time televised news conference Mr. Mantega announced the new measure: an extension of a 6% tax on short term foreign-currency loans to longer dated paper, from 360 to 720 days.

It was at least the fourth capital control introduced by Mantega since October.

CONTINUES HERE.

These days,  Brazil's currency muscle is measured not only in dollar terms down this way. You only need to look at the number of deals Brazilian companies are looking to make in other LatAm countries (and really, there are too many to note here but all sectors, from minerals to manufacturing, are seeing companies in Spanish speaking South America snapped up by Brazilian companies) to get a better feel. Another way is to visit Brazil's metropoles, such as Rio or SP, and note the cost of living is on a par with any "first world" country for foreign visitors.

UPDATE: Reader, site friend, Brazil expert and all-round good egg Drunkeynsian leaves this in the comments section and fwiw it sounds spot on to me:

Brazilian government doesn't want to mess with the level of the currency. Since Central Bank decided not to raise rates aggressively to contain inflation, any help from import prices is welcome. Exporters complain and get some fireworks, but it seems clear to me Brazil is choosing a quite radical Ricardian approach to its future: sell commodities, forget about the rest, and pray for a very long cycle. The other side of that is a net foreign liability of US$ 700 billion, but nobody seems to care about it now.

So what's all that about a strong dollar? LatAm is whuppin' yer tushes

This chart maps the progress of the US Dollar versus the six main traded currencies in LatAm over the last three months.

Chile Peso (CLP) and Brazil's Real (BRL) have both lost about 7% of value against the greenback in the quarter and as they are both headline-type currencies (Brazil the miracle and Chile the closest thing LatAm has to a serious country) they give the impression that the dollar has been all-conquering down this neck of the woods, too.

But it ain't necessarily so, Joe. Argentina's massively massaged Peso (ARS) has basically held its own vs USD. Meanwhile, three openly traded currencies down this way, namely Mexico's Peso (MXN), Peru's Nuevo Sol (PEN) and Colombia's Peso (COP) have all beaten out the dollar by a couple of percentage points.

Why is this so? My best guess is that LatAm isn't faking some sort of economic recovery. It's actually happening down here.

Regional currencies update

With Bloomie blasting silly headlines about Chile's Peso (CLP) being "the world's best currency this week" and Colombia's "the worst", I thought it was high time to revisit the evolution of local currencies versus the dollar and get a bit of perspective. This one year chart....

.....shows the various rises and falls (or in Argentina's case rises and rises) against the dollar for the major locally floated currencies (not much point in featuring the Vzla Bolivar Fuerte here, and Paraguay's Guaraní.....well, it's never going to attract the attention of George Soros, is it?).

The main takeaway? Some currencies are strengthing back more quickly than others. But in the end, when push comes to shove and despite all the worldwide handwringing about Helicopter Ben and his printing presses, the dollar is still the daddy. Every single major trade currency in LatAm is down against the dollar YoY, even the economic miracle packaged up for saps with a bow and labelled Peru. And with base lending rates dropping fast all over the region as countries try to stimulate growth, the attraction of parking cash at higher risk is lessening, too.

Anecdotally, if you ever need a lesson in what the term "reserve currency" really means come down here with a thousand British Pounds, or Euros, of Aussies or Loonies or even an ounce of gold in your pocket and try to exchange them for the local currency of your choice and at the same time get the same fair deal you'd get for the equivalent amount of USDs. They say travel broadens the mind..................