Brazilian president Dilma Rousseff said this week that her administration had no plans to take any new measures against a rising currency. The Brazilian real is now at its strongest level since the summer of 2008. It closed at BRL1.55 on Thursday.

All last year, the government had an official limit set to the real. Anytime it strengthened to BRL1.65 against the dollar, Finance Minister Guido Mantega would introduce taxes on foreign investments, or other measures designed to keep the currency in check. In October 2010, Mantega raised a financial transactions tax on local currency bonds twice in one week. The real weakened briefly to around BRL1.70. It didn’t last. In early 2011, shortly after the Carnaval celebrations in March, Mantega raised taxes on other currency and credit transactions as the real bulked up yet again to BRL1.65. But after that, it was all downhill. The market no longer seemed to care about the measures, and the real kept raising as nearly everyone investing in Brazilian currency forecast it to do.

On Thursday, an article in Brazilian business daily Valor Economico implied that Dilma has not authorized any new measure to intervene in the currency as it continues to strengthen. Foreign direct investment into Brazil, nearly $50 billion expected this year, is making it hard for the government to control the real. Moreover, a global weak dollar scenario is not helping the matter. Add that to the fact that Brazil has the highest investment grade debt in the world, currently yielding over 12.25%, and you have a lot of dollars chasing Brazilian assets, most of it long term.

At this point, Dilma appears to have surrendered to a strong currency. She is probably more concerned with inflation — which rose to 6.7% in the last 12 months, the highest level all year. A stronger real will alleviate some of that pressure.

“I don’t expect the Brazilian real to appreciate significantly from here,” says Sara Zervos, fund manager of Oppenheimer mutual funds’ international bond fund (OIBAX) and its new emerging markets bond fund (OEMAX). She still thinks there is a possibility of the country using ad hoc measures to contain appreciation. “I do think there is a probability that we will see a 1.50 handle or even stronger given the ongoing strength of foreign direct investment, which could meet the perfect storm of another round of a weak US dollar globally,” Zervos says.

Like many emerging markets, Brazil has been wrestling with inflation all year. Inflation in Brazil was largely the result of credit demand from consumers — which was tackled with high interest rates and bank reserve requirements — and quantitative easing in the US — which was like throwing suitcases of money into a field of wind turbines. Brazil hasn’t had high inflation since the early 2000s. Tight monetary policy has turned investors off to its equity market since last November. The BM&F Bovespa is down over 12,000 points since then and the iShares MSCI Brazil exchange traded fund (EWZ) is down 10% since the high of Nov. 5.

On Thursday, the government released June IPCA inflation data showing an ongoing struggle in stamping out price increases. Inflation was down to 0.15% in June compared to 0.47% in May and 0.77% in April. Consensus was 0.07%. Year-to-date, inflation is 3.87%, but on a 12-month rolling basis it moved up to 6.71% from 6.55% in May and is now above the upper-band of the Central Bank’s inflation target.

The diffusion index, which measures the percentage of prices on the upswing, dropped to 58.9% in June from 64.8% in May but was driven mainly by falling food prices. If food prices had remained stable, the diffusion index would have been higher than it was in May. Service sector inflation was flat at 0.60% in June, which would indicate that measures to curb consumer spending are working.

Barclays analysts said that Thursday’s data “will mark the floor of month over month inflation readings in Brazil this year. The July and August readings should remain temporarily contained near the 0.25% handle. But we expect it to be creeping back up to 0.50% as we move out of the third quarter and into the fourth. More important, however, despite the low headline readings, underlying inflation should remain sticky, which is consistent with our view that there is a small probability of inflation converging back to the midpoint of the inflation target next year. We continue to expect IPCA inflation at 6.5% in 2011 and 5.6% in 2012.”

If President Dilma is concerned about inflation and not keen on Mantega style currency controls, then BRL1.50 could be the new unofficial tolerance level for the real, especially if inflation returns in the second half as Barclays is forecasting.