The competitive benefits of low (i.e. undervalued) exchange rates are well known (evidence), but by definition, we can’t all have them. Still, some countries such as China are fairly active managers of their exchange rates (evidence/reaction). If/when countries start managing their exchange rates down, there is a strong temptation for others to follow suit, all the more so when the initiator is a big economy.
So its big news that Brazil has just imposed a 2% tax on portfolio capital inflows in what looks like an effort to stem the appreciation of its currency.
Where this will lead is anyone’s guess, but here is The Economist suggesting that “the current system is unsustainable“.