Brazil will impose a tax on banks' short positions on US dollars in a bid to curb speculative trade that has been pushing the local currency higher in recent months, the central bank said on Thursday.
The tax will be equivalent to 60 percent of whatever is smaller: a short position on US dollars of $3 billion or the bank's reference capital. The measure, aimed at reducing short positions, will be effective as of April 4, the central bank said. Banks' short positions on US dollars, a bet that the real will strengthen versus the dollar, have surged in recent months to $16.8 billion at the end of December.
Brazil is one of a number of major emerging economies battling the impact of a flood of cheap cash due to ultra-low Western interest rates. The speculative flow has driven up their currencies and prompted fears it could weaken exports and competitiveness. Finance Minister Guido Mantega said on Tuesday that Brazil's new government would address the damage caused by the strong real currency by enacting tax breaks and new trade protections, rather than attempting to artificially weaken the exchange rate.