"There is a scramble for export competitiveness and that's going to continue so we're going to have more comments such as Mantega's and more central banks intervening," said Neil Mellor, a currency strategist at Bank of New York Mellon Corp. in London. "It has to be a subject discussed at G-20 but where the meetings of minds will be is very difficult to guess."

Since G-20 leaders began holding summits in November 2008, they have pledged not to raise or impose trade barriers, seeking to avoid the type of protectionist measures that crippled the global economy in the 1930s.

G-20 Pledges
The G-20 pledged in April 2009 in London to "refrain from competitive devaluation" of their currencies, and the leaders said at their last gathering in Toronto in June that "market- oriented exchange rates that reflect underlying economic fundamentals contribute to global economic stability." Devaluations were blamed for worsening the Great Depression.

Even so, Mantega said yesterday said that "we are experiencing a currency war -- devaluing currencies artificially is a global strategy." He added that his government will buy all "excess dollars" in the market to curb the real's appreciation. "We're already buying a bigger volume of currency -- we'll keep buying."

China has incurred international criticism for limiting gains in its exchange rate. The yuan has risen about 2 percent versus the dollar since the People's Bank of China in June pledged greater flexibility in the currency after pegging it around 6.83 for two years.

Eoin Treacy's view Fullermoney has long said that happiness in the currency markets is when the trend and the central bank are on our side, and that in the competitive world of globalisation no country wants a strong currency but some need a weak one more than others. How do we use these maxims to interpret the competing goals of central banks and the export economies they represent?

Given the obstacles to growth continuing to threaten the USA, much of Europe and Japan these countries are perhaps the most interested in keeping the relative value of their currencies low in order to maximise their potential for growing their way out trouble. Asia's population centres and commodity producers globally have all seen their currencies rise impressively over the last 18 months. Some are now testing their 2008 highs and a very small number have broken upwards to new highs. However, this puts pressure on companies repatriating earnings back into local currencies and some countries are beginning to more than simply talk about slowing the appreciation of their currencies.

Brazil has perhaps been the most high profile, strong growth economy to attempt to stem the advance of its currency. The government has introduced measures to slow the flow of speculative funds into the country. The Japanese have intervened to stop the Yen's advance but since they have yet to follow through on their initial foray investors are questioning the government's resolve. Switzerland has also attempted to reverse the strength of the Franc while the USA and UK have been among the main countries engaged in quantitative easing which has put downward pressure on their currencies.

China's influence on the wider Asian economy continues to grow and the partial relaxing of the Yuan's peg to the Dollar has removed some competitive pressure from its neighbours. The Asian Dollar Index broke above the April highs three weeks ago and while a little overbought in the very short-term a sustained move below the 200-day MA would be required to question medium-term upside potential. The Singapore Dollar is one of the best performers in the Index and is the only Asian currency to have surpassed its 1997 peak.

Given increased concerns about the loss of purchasing power in the G-4 currencies and the extent to which Asian and Latin American currencies have already rebounded from their 2008 lows, the path of further appreciation is likely to be somewhat slower than seen over last 18 months. Singapore has ambitions of being the Switzerland of Asia and there is no reason to doubt their resolve. In this case at least, the trend and central bank are in favour of long positions and the country seems willing to tolerate the strength of its currency at least in part because it bolsters its safe haven status.