Brazil Charges 1% Tax on Bets Against US Dollar, Threatens 25% Tax; Brazilian Real Overvalued, FDI Will Reverse

Wednesday, July 27, 2011 2:07 PM

The global imbalances continue to grow and the reactions to those imbalances is nothing short of madness.

As a case in point, Brazil Charges Tax on Bets Against Dollar as Real Rallies to 12-Year High. http://www.bloomberg.com/news/2011-07-2 ... -real.html

Brazil imposed a tax on bets against the U.S. dollar and warned it may boost intervention in the nation’s derivatives market in a bid to weaken a currency that reached a 12-year high this week.

As part of a new round of currency measures unveiled today, the government levied a 1 percent tax on short dollar positions in the country’s futures market above $10 million in notional value. The government may increase the tax up to 25 percent if needed, according to the decree signed by President Dilma Rousseff and published today in the Official Gazette.

Finance Minister Guido Mantega said that the measures give the government a “bigger arsenal