Central bank intervention: Brazil fires currency bazooka at speculators

Hank Paulson first brought the bazooka metaphor to the public’s attention at the nadir of the banking crisis in 2008, but the Brazilian Central Bank has been applying it in its currency war with speculators.

Since September the BCB has begun twice-daily currency auctions, sometimes holding three in a day; has trebled its tax on foreign investment in Brazilian fixed-income securities; set reserve requirements at 60% on short-dollar positions held by local banks; and reintroduced reverse currency swaps to effectively buy dollars in the currency futures market for the first time since May 2009.