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Brazil cheers Fed decision, sees less volatility ahead

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(Globalpost/GlobalPost)

By Paula Laier and Alonso Soto

BRASILIA (Reuters) - One of the most vocal critics of the United States' monetary policy, Brazilian Finance Minister Guido Mantega, on Wednesday cheered the Federal Reserve's decision to leave stimulus unchanged, saying it may signal an end to market turmoil.

Mantega, who gained international fame for using the term "currency wars" to describe rich nations efforts to lift exports by weakening their currencies, said a gradual stimulus withdrawal may boost Latin America's largest economy.

"Volatility could be dissipating and this will help improve the business climate," said Mantega, who has accused the Fed of triggering recent market volatility with "confusing" guidance.

The specter of a cut in the Fed's bond-buying program has driven investors out of emerging-market countries en masse, threatening the once high-flying economies as the value of local assets plunged to multi-year lows.

Latin American currencies, stocks and bonds quickly soared on Wednesday after the U.S. central bank surprisingly decided to stick to the stimulus plan for now, fearing higher borrowing costs could undermine the country's recovery.

Brazil's real jumped nearly 3 percent to close at 2.1935 per dollar, its strongest since late June.

"The Fed is signaling a soft landing ... that it will cut (stimulus) more slowly," Mantega said.

He said a slightly stronger real could prop up local economic activity, ease inflationary pressures and reduce a widening gap in the country's external accounts.

Mantega went as far as to say that Brazil's own central bank may not need to use all of the $60 billion it earmarked for a daily forex intervention program that aims to ease the real's tumble.

Less than a year ago, Brazil was rooting for exactly the opposite. Then an avalanche of cheap money flowing from the United States prompted President Dilma Rousseff to set up capital barriers to halt a sharp currency appreciation that threatened local producers and exporters.

(Corrects day of week from Tuesday to Wednesday in first paragraph)

(Reporting by Paula Laier, Luciana Otoni and Alonso Soto; Editing by Andre Grenon and Stacey Joyce)

http://www.globalpost.com/dispatch/news/thomson-reuters/130918/brazil-cheers-fed-decision-sees-less-volatility-ahead