By Richard Rittorno
Emerging market currencies have been beaten up of late, with the Brazilian real (BZF) being one of the hardest hit. That has forced the Central Bank of Brazil (EWZ) to take action. Yesterday, the central bank said it will be intervening on behalf of their currency by providing at least 60 billion in liquidity from now to the end of the year. The central bank will provide stimulus by offering $3 billion in loans and swaps per week starting today, and it will continue through end of the year.
It's not all that much of a surprise, given Brazil's long battle with inflation and a currency that has dropped to its lowest level since the 2008 global crisis on President Dilma Rousseff's watch (and heading into an election year). Bottom Line: Brazil and other emerging market currencies are facing headwinds as the U.S. Federal Reserve readies its tapering plan, sending the U.S. dollar higher.