The currency wars are under way again and Brazilian Finance Minister Guido Mantega, who coined the term, is miffed.
Mr Mantega is worried that QE3 will do what QE2 did and lead to an “avalanche” of dollars hitting emerging markets, driving up prices and currencies, helping US exports and creating troubling inflation. If it prompts the Brazilian Real to strengthen, he warned of action – although he did not say what the Brazilians might do this time:
This is going to force the Brazilian government to adopt additional measures to prevent the Real being overvalued.
Brazil imposed a series of taxes and restrictions on foreign inflows over the past three years in an effort to stop speculative cash pushing up the currency, but relaxed many of them after the renewed eurozone crisis led the Real to plunge.
Still, it isn’t obvious that Brazil is losing the currency war, as these charts show:
As predicted, there is more to say about the London housing market. It is widely known that the buying pressure on prime London properties is coming from overseas. The eurozone crisis and the creation of fortunes by the commodities boom have helped push lots of money into the nicer neighbourhoods of central and west London.
But I had not previously grasped that foreign demand was also driving segments of the market below the true “prime” postcodes, and that that foreign demand is not primarily European or Middle Eastern but rather from Hong Kong, Singapore and Malaysia. That is the strong message from this extraordinary chart from Jones Lang LaSalle, shared by Ed Hammond, our property correspondent, in the latest Note video: