I expected the European commentariat to take to the microphones to start talking down the euro but they have beaten to the punch by the Brazilians. The finance minister of the darling of the emerging markets says the recent gains of the Real are a cause for concern.
With the global recovery in its very early stages (if that), expect more appeals for stability from around the globe in the days ahead. Should intervention to weaken local currencies intensify, expect the US yield back-up to stall. They gotta put the proceeds somewhere.
The trouble with intervention to maintain export competitiveness is that is what got us into the unbalanced situation that inflated US asset bubbles left and right. Hopefully we’ve all learned some lessons.
