A computer hacker group on Friday continued a wave of attacks against Brazilian financial websites, hampering the sites of Citigroup Inc. and other prominent institutions.

The group, which dubbed itself Anonymous Brasil, took aim at a series of websites, launching "denial of service" attacks against the pages of the Brazilian banking federation, called Febraban, as well as Banco BMG, Banco Panamericano (BPNM4.BR) and the pages of Citigroup both in Brazil and in the U.S.

The websites of all those named were operating intermittently Friday, and the hackers said they had extended their attacks to other websites in the afternoon. The hackers say they use "denial of service" tactics to overwhelm websites with requests for access, but that they aren't trying to steal data or money.

A Citi spokesman in New York said, "On Friday morning, Citi's consumer website experienced a temporary interruption in service. Our online team worked immediately to address the issue, and operations were restored within one hour. We are continuing to monitor the system to ensure continuity of services. At no point were there data integrity issues or compromise of client account information. We apologize for any inconvenience."

A spokesman for Febraban said there was an unusually high number of accesses to the group's website. Banco BMG and Banco Panamericano confirmed that they received an overload of accesses that caused delays on their sites, but didn't confirm whether the problems were caused by hackers.

The hacker group also claimed on its Twitter account to have briefly targeted the central bank's website early Friday, though the institution didn't confirm the website problems were caused by hackers. During the morning there was an overload of accesses to the central bank's website bringing instability and delays, the central bank said, but "no bank systems or transactions were affected."

The central bank, which is responsible for banking regulation in Brazil, said it had no immediate action planned to respond to the latest attacks.

The hackers group, which says its promoting a campaign against corruption, earlier in the week claimed responsibility for crippling the websites of Brazil's largest state-run and private-sector banks, including Banco do Brasil SA (BBAS3.BR, BDORY), Itau Unibanco Holding SA (ITUB4.BR, ITUB), Banco Bradesco SA (BBD, BBDC4.BR) and HSBC Holdings PLC (HBC, HSBA.LN).

Anonymous Brasil, which is a collaborative effort between hacker subgroups identified as Anti-Security Brazilian Team and iPiratesGroup, has said that its efforts are aimed at activism to bring more social and economic equality to Brazil, and that it isn't interested in theft.

The group, which announced its attacks via Twitter, has published an action list for further attacks this year, which will include airlines, telephone companies, credit-card companies and government websites. The groups said they also plan to hijack transmissions by radio stations.

Dow Jones Newswires

The foreign exchange market was taken by surprise today when one of the more popular currencies on the rise came under a harsh set of new taxes. AFP reported that Brazil has imposed new taxes on currency derivatives across the board.

The new tax begins at 1 percent of all transactions, but the law allows for it to potentially grow to as much as 25 percent, and covers all forms of forex trading. The Brazilian Real has risen 8 percent against the dollar since the beginning of the year, reaching a high of around R$1.535 to the dollar.

The move came as the dollar continues to slump in the face of worries about the debt ceiling debate in Washington, and hopes to protect the country's manufacturing sector from speculative rises.

Brazil's central bank spent about $36 billion intervening in the markets in an effort to slow the rise of the real in the first six months of the year.

Brazilian officials have criticized the United States for flooding the world with cheapening dollars and China for not floating its currency.

Tony Volpon, head of emerging markets research for the Americas at Nomura, told the Financial Times that the breadth of the tax is likely to lead to some exemptions down the line.

"This is a relatively severe measure because it's so comprehensive," Volpon said. "It affects Brazilian banks, companies, residents, non-residents."

Brazilian Finance Minister Guido Mantega has attacked China and the United States for manipulating their currencies, at the expense of trading partners.

"Of course, China manipulates it's currency and it (would be) better that the currency could fluctuate," Mantega told reporters after a meeting in Paris, picking up on a charge made by many of Beijing's trade partners.

At the same time, the minister criticised Washington, accusing it of adopting policies which led to a cheap dollar, crimping exports to the US market.

China and the United States are crucial markets for Brazil, especially of its agricultural products, but it has been increasingly unhappy that its own currency the real has soared in value while the yuan and US dollar have weakened to its disadvantage.

"I'm critising all the manipulation of currencies, not only the United States," Mantega said.

"I don't know if in the United States it's exactly a manipulation. It's the quantitative policy that goes to an undervalution of the dollar," he said. The US Federal Reserve introduced a policy of Quantative Easing, which effectively creates new money, at the height of the global financial crisis in an effort to get the slumping US economy back on track.

While justified as an absolutely crucial stimulus measure, QE in effect creates more dollars, acting to depress the value of the currency.

Washington has long charged Beijing with manipulating the yuan to gain an unfair trade advantage but China has replied in kind, voicing concerns that QE and a weaker dollar could undercut the value of its massive holdings of US government bonds and other dollar assets. Mantega was asked what his government would do to ensure that the Brazilian real is not permanently overvalued but he declined to go into specifics.

"All the time, we are taking measures to avoid the overvaluation of the real. I can't explain (more)... because it's a surprise," the minister said.

Brazil has tried to slow the real's gains by limiting fund inflows, among other measures, but to little effect as strong economic growth and high interest rates continue to attract overseas money.

The Brazilian real is currently at around 1.56 to the US dollar, the highest level seen since the unit was floated in 1999 as the economy booms on massive demand for the its goods and raw materials at home and abroad.

AFP

I have been following what China has been doing with its currency since the head of China’s central bank proposed replacing the dollar with an international reserve currency at April's G20 meeting.  Today the chairman of China's second largest bank, China Construction Bank, said that he is exploring offering renminbi-denominated trade finance credit that could make the Chinese currency more widely used internationally.  More...

Since December, China has signed currency swap agreements with seven of its trading partners including Argentina, Belarus, Brazil, Hong Kong, Indonesia, Malaysia and South Korea which enables these countries to pay for Chinese exports in yuan rather than dollars. This means that 95 billion, in what would normally be dollars, will now be transacted in 650 billion yuan over three years.

China, Argentina's second largest trading partner, entered into a bi-lateral 70 billion yuan ($10.2 billion) currency swap agreement that enabled Argentina to place orders for Chinese imports in yuan and not dollars. They followed with a 100 billion yuan ($14.6 billion) currency swap agreement with Indonesia and a 20 billion yuan ($2.9 billion) agreement with Belarus. Most recently, they closed an agreement with Brazil.

All this activity is making the U.S. general public increasingly fearful that these swap agreements are a step toward making the yuan a convertible currency that will replace the dollar as the world's reserve currency.  But the general public doesn't understand the essence of currency swaps and convertible currencies.   

First, China’s currency can’t be exchanged on foreign exchange markets for other currencies because the Chinese government has deemed it non-convertible.  Unlike the dollar, yen, or euro, this limits the yuan's use in international trade transactions.  So China has opted, in the near-term, to enter into these bi-lateral currency swap agreements.

A currency swap between countries is basically a foreign exchange agreement where one currency is traded for another for a negotiated period of time.  In essence, the swap is like a loan where one country gives its currency to another in return for an equal amount of the other country's currency at a later date. For example, the U.S. Federal Reserve has been executing currency swaps for years in conjunction with IMF loan programs to support developing nations which might require immediate financial assistance.

Beijing's big concern is the $2 trillion in dollar assets they have accumulated over the years through exports to the U.S. in addition to the huge quanitity of U.S. treasuries they have purchased.  China is looking long-term to reduce its reliance on the dollar and thereby its risk.  At this point in time, currency swap agreements offer their best option. 

Tuesday morning the Financial Times reported that China and Brazil are planning to use their own currencies to trade rather than using the dollar.  This means that China would pay for products like Brazilian oil and beef using the Brazilian Real and not the U.S. dollar.  Brazil would, in turn, accept the Renminbi from the Chinese.  Although, this prospective trade agreement wouldn't break the U.S., it could be a first leak in the dike.  The Chinese have already expressed their support for Russia's initiative to develop a new global reserve currency as an alternative to the U.S. dollar, but the $2 trillion the Chinese have in foreign exchange reserves have kept them from being more aggressive. An agreement with Brazil would allow them to reduce their dollar reserves slightly, since they wouldn't need the dollar to trade with Brazil.
 
Why do you care? If another currency or basket of currencies eventually replaced the dollar as the reserve currency, the U.S. would face higher interest rates to attract capital, reducing economic growth for the long-term. Consider an article published in "The Economist" on May 14th which said, "Having spent a fortune bailing out their banks, Western governments will have to pay a price in terms of higher taxes to meet the interest on that debt. In the case of countries (like Britain and America) that have trade as well as budget deficits, those higher taxes will be needed to meet the claims of foreign creditors. Given the political implications of such austerity, the temptation will be to default by stealth, by letting their currencies depreciate. Investors are increasingly alive to this danger..."

According to the Federal Reserve, there is $829 billion dollars of U.S. currency currently in circulation; the majority being held outside the United States. As of May 7, 2009, the total U.S. federal debt was $11,256,266,640,050.20, ranked 12th in the world. This debt is about 80 percent of GDP. Its no wonder the Chinese are concerned.

Didn't Confucius say, "A journey of a thousand miles begins with a single step."