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Brazil confirms purchase of 10 billion US dollars in IMF bonds

Thursday, June 11th 2009 - 11:10 UTC
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Finance minister Mantega pointed out that the move is not intended to weaken the US dollar. Finance minister Mantega pointed out that the move is not intended to weaken the US dollar.

Brazil will buy 10 billion US dollars of bonds issued by the International Monetary Fund to help the multilateral lender provide financing to countries hurt by the financial crisis, announced Finance Minister Guido Mantega.

“Brazil will invest part of its foreign reserves to buy the bonds, which will pay similar yields to US Treasuries” Mantega said in Brasilia. The central bank will decide which assets to sell from its reserve portfolio to free up the funds needed to purchase the IMF securities, he added.

“This is an investment that Brazil is doing with part of its reserves and making available financing so that the IMF may help emerging countries, especially developing countries which today face a shortage of capital because of the global financial crisis” Mantega said. However he pointed out that Brazil’s decision is not aimed at weakening the US dollar.

Russia’s Central Bank said Wednesday it may cut investments in US Treasuries, currently valued at as much as 140 billion US dollars, a week after China said it may reduce reliance on the dollar and US bonds.

“This is no move to weaken the dollar, as a matter of fact, for us, there is no interest in weakening the dollar, because when the dollar weakens the Real gets stronger and when the Real gets stronger the exchange rate trips our exports up a bit,” Mantega said.

“What we really want is that other currencies are also behind international transactions”.

Mantega said the financing is temporary until IMF quotas are raised for emerging market countries.

Russian Finance Minister Alexi Kudrin said last month that Russia will buy 10 billion US dollars of IMF bonds from its reserves and China may buy as much as 50 billion, IMF Managing Director Dominique Strauss-Kahn said on Tuesday.

Some investors are wary of US assets because the US budget deficit is projected to reach 1.75 trillion US dollars (13% of GDP) in the year ending Sept. 30 from last year’s 455 billion US dollars, the Congressional Budget Office says.

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