US tries to recruit Brazil in ‘currency war’ on China

Washington appears to be trying to recruit Brazil in its undeclared currency war against China after the United States Treasury Secretary commiserated the South Americans on the high value of their currency.

On his first official visit to Brazil, Timothy Geithner said that the country's manufacturing base - and exports - had been harmed by upward pressure on its currency, the real.

A strong currency means a country can be flooded with imports – particularly from China, which is accused of artificially keeping its currency, the yuan, undervalued and therefore its exports ultra-competitive.

Although Geithner did not mention China by name, a report by the US Treasury recently said the yuan remains "substantially undervalued".

Brazil has been the target of overseas investors, who see it as offering better returns than other emerging economies. Geithner said pointedly: "These flows have been magnified by the policies of other emerging economies that are trying to sustain undervalued currencies, with tightly controlled exchange-rate regimes."

It is thought Geithner's comments herald a joint offensive in which Brazil and the US will separately urge China to take action and allow the yuan to rise in value.

Read a full report at the Daily Telegraph. ·