The official foreign currencies exchange in Latinamerica
August 21, 2008
The official foreign currencies exchange is established according to the priorities of the economic model of the country.The value adopted by the official foreign currencies exchange will be a key indicator to know in which direction the wind blows.
In Argentine, for example, during the 90’s and until 2002 the official foreign currencies exchange rate was fixed to one peso, one dollar. That means that for each peso issued by the monetary authority (Central Bank) there should be a dollar in the Public Treasury that supported it.
After 2002 the official foreign currencies exchange rate changed, after convertibility the peso was devalued and actually the official foreign currencies exchange rate moves between $3.20 per dollar.
In other Latinamerican countries the dollar value is not as high and the official foreign currencies exchange rate, for example, in Brazil is 1.83 reales per dollar.
In Venezuela, for example, official foreign currencies exchange rate is about 2250 bolivares per dollar, but the feature that this country has is that there is an spot market in which the official foreign currencies exchange rate quotes at 5500 bolivares.
In Latinamerican countries the official foreign currencies exchange is tied to the dollar standard as reference currency with which it can be calculated the value of commercial goods.
Although many economists confirm that the currency exchange is regulated by the simple game of the supply and the demand, the reality indicates that the macro-economic factors play a determining role in the price and exchange of currency. These are some of the reasons for which the movements in the price of foreign currency exchange take place and that is soon reflected in the behavior adopted by the investors in the currency exchange. That is why if you knew to process all the provided information the currency market would be a whole procedure…
