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Currencies |
| BRAZILIAN REAL |
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| Introduction
| Overview | Structure
| History | Factors
affecting change in exchange rates | Daily
trend of Brazilian real | Weekly
trend of Brazilian real |
| Introduction |
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Real had been an important currency in the South American
continent for a very long time. The currency was first used by the
Portuguese explorers who first settled in the new world and also
by the Dutch in around mid 17th century when they occupied some
part of Brazil.
Currently, real is the official currency of Brazil and that is why
it is called the Brazilian real. The currency is denoted with the
symbol "R$" and was adopted as country’s official
currency in as early as 1690 till 1942 and was re-implemented on
July 1, 1994. The Brazilian real has BRL as its currency code and
986 as its numeric code according to the ISO 4217 regulation. Real
in plural terms is called "reais" and it replaced the
interim currency "cruzeiro". The currency is divided
into 100 equal subunits named "centavo" i.e.
"centavos" in plural terms.
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Overview
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The Brazilian currency has helped the country’s financial
position go strong and also helped to strengthen the economy. Real
had been the official currency of the country since the 17th
century and the decision taken for the re-implementation of the
currency in 1994 got so popular that it made the minister of
finance at that time, Fernando Cardoso, the president of the
country. Brazil has been blessed with an over abundant oil supply
that makes it in possession of the second largest oil reserves in
the south American continent. But it still is not self sufficient
in terms oil and the country has to import it from other countries
arising need to have a strong currency. This need is well
supported by the Brazilian real.
The major influencing factor in the replacement of Brazilian real
with cruzeiro in 1942 was inflation. Since the currency has been
re-implemented, the inflation rate has been maintained at normal
levels as a precautionary measure so that the currency stay stable
and strong. Some other policies also tend to control the inflation
rate and keep the interest of the people in real as a currency.
The citizens of the currency have not been given the authorization
to maintain bank accounts in foreign currency and also the
traveler’s cheques are restricted. But all the major cities in
the country have currency exchanges of their own. Free imports and
exports of all the currencies have been maintained and if the
amount exceeds 10000 reais, it has to be declared.
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Structure
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The Brazilian real is the legal tender in Brazil
that has centavo as its subunit being 100
centavos = 1 real. Central bank of Brazil acts
and serves as the reserve bank in Brazil and has
sole control over the production and
distribution of the currency in the country. The
central bank get the Brazilian real notes
printed and the coins minted from Casa da Moeda
do Brasil, the official mint in the country. The
banknotes are printed in 7 denominations that
are 1 real, 2, 5, 10, 20, 50 and 100 reais. The
obverse sides of all the notes depict the effigy
of the republic but the reverse sides of notes
have different images of animals and birds. The
R$1 note show an image of a hummingbird, R$2
note has a hawksbill turtle, R$5 note possess an
image of the great egret, R$10 note has a green
wing macaw, R$20 show a golden lion on its
reverse side, R$50 show an image of jaguar and
the R$100 note depicts a dusky grouper image.
All the notes are similar in dimension and are
differentiated with the help of colors mentioned
in the table below
R$1 - Green
R$2 - Blue and gray
R$5 - Violet
R$10 - Crimson
R$20 - Yellow and orange
R$100 - Blue
The central bank of Brazil
has stopped the production of the R$1 banknote
but it is still in circulation rarely used in
the day-to-day transactions. More recently, a
more complex, polymer version of the R$10 note
has also been printed and circulated. The smaller values in the currency are issued as
coinage. The currency coinage is divided into
two categories - the first family that was
minted using stainless steel in 1994 and the
second family that was issued in 1998 having
different colors for different denominations to
facilitate the use by the mass and to restrict
counterfeiting. The Brazilian government has
plans to withdraw the second family coins
gradually from the circulation but currently
both the set of coins are legal tender in the
country. The coinage is issued in 6
denominations each of both the sets of coins
namely 1 centavo, 5, 10, 25, 50 centavos and 1
real. The front sides of all the coins of the
all the denominations in the 2nd family depict
the Southern Cross and the value of the coin and
the reverse sides possess the engraved images of
the important people from the history of Brazil.
Three commemorative coins were also issued in
the years 1998, 2002 and 2005 respectively.
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| History |
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The history of the Brazilian real
dates back to the early 16th century, the time when
the new world was discovered courtesy Christopher
Columbus and the Europeans started coming and settling
on this new land. The concept of real as a currency
was a Portuguese concept and later on picked up by the
Dutch settlers who made the currency official in 1654.
An interesting fact about the currency is at that time
real did not have any subdivisions. It was made the
official currency of Brazil in 1690 and since then it
served as the legal tender in the country till 1942.
All this while when Brazil faced huge changes
initially being a colony to the various European
countries, then as an imperial state and finally when
it converted into a republic in 1889, the Brazilian
real also underwent many changes.
The major change that affected the currency adversely
during its long life span was inflation and due to
extreme levels of inflation in real, even its base
unit got shifted from 1 real to 1000 réis at once and
also to 1 million réis at one time. Finally in 1942,
the currency was replaced by "cruzeiro" @ 1000 réis
= 1 cruzeiro. Cruzeiro served as the official currency
of brazil till 1994 when it was replaced by real
again. This time the currency was indirectly pegged to
the United States dollar with a value close to it.
initially the currency performed well and it even
attained a higher value than the dollar at one time.
but the appreciation turned out to be a short lived
process and in 1995 a gradual depreciation commenced.
In 1999, when the country faced a huge financial
crises, the currency suffered the maximum devaluation
and reached its lowest value i.e. R$ 4 = US$ 1 and as
a result the peg to the US dollar was removed. In the
current scenario, the currency has improved a bit and
has showed signs of recovery.
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| Factors
affecting the exchange rates between two countries
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The volatility in the foreign exchange rates
depends upon a numerous macro economic factors that
have different degrees of importance to different
economies of the world. Some special and exceptional
factors affecting the rates may also exist in the case
of different countries. Following are shown the common
factors on which the foreign exchange rate depends
- Flow of imports and exports between the
countries
- Flow of capital between the countries
- Relative
inflation rates
- Fluctuation limits on exchange rate
imposed by the governments of the countries
- Merchandise trade balance
- Rate of inflation in the country
- Flow of
funds between the countries for the payment of
stock and bond purchases
- Relative growth
- Short term
and long term interest rate differentials
- Cost of borrowings
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