What is Foreign Exchange?
Foreign Exchange is the exchange of one currency for another. When you buy dollars to travel or when a company imports products, you are making a foreign exchange transaction. The exchange rate indicates how much one currency costs in relation to another.
How does it work? the exchange rate
- USD/BRL = 5,50 means that 1 dollar costs R$ 5,50
- The rate changes every second in the market
- It is influenced by interest rates, inflation, politics, and capital flow
Types of Foreign Exchange
| Type | Use | Spread |
|---|---|---|
| Commercial | Companies, import/export | Lower |
| Tourism | Buying currency for travel | Higher (3-5%) |
| Parallel | Informal market (illegal) | Variable |
Tips for buying foreign currency
- Buy in small amounts — don’t try to time the best moment
- Compare exchange offices — spreads vary greatly
- Avoid airports — rates are the worst
- International debit card — usually better than cash
- IOF: 4,38% on card, 1,1% in cash
Foreign Exchange and investments
Investing in dollar-denominated assets (international ETFs, BDRs) is a way to protect yourself from the devaluation of the real. When the dollar rises, your international investments appreciate in reals.