Hello everyone, this is a public utility post for anyone planning to buy dollars, or make remittances and invest overseas. We know that the dollar / real exchange rate is very volatile and we can buy the dollar at an unfavorable time, and the bigger the purchase the worse for people of course.
So here’s a little guide to find out the dollar’s fair price. The same reasoning can be used for any other currency, as long as you find an index similar to the IPCA to compare both currencies. To study the exchange rate, economist Ludwig von Mises used purchasing power parity as the fairest, correct, and efficient parameter for comparing currencies over the years.
I could describe all the science here, but I’m not an economist and I could not even say it with my words, so I prefer to ride the Mises teachings that I like very much. I decided to make this post thanks to a comment from an investor in a blog post of Soul Surf (financial thoughts) that I have here in my links. The investor has traced the small path of the stones and I went there and made “in the hand” that is to be able to learn even, so I will always do.
The Real R$ was born on 01/07/1994 (note this date) and with parity with the dollar of 1/1. At that date 1 real = 1 dollar. (Thanks to FHC who adjusted our international dollar reserves and created the Real (this was not easy to do technically speaking).
You only need to correct the REAL by the IPCA since its inception.
You only need to correct the USD by the CPI (Consumer Prices Index) locked on the same date of creation of the real (7/1/1994) and divide by the other.
To fix the REAL check this site: http://www.calculador.com.br/calculo/correcao-valor-por-indice Calculator IPCA, the result of today = R$ 5.47, or R$ 5.47 today Buy the same as they bought on 07/01/1994. IPCA gave 547%!
To correct the DOLLAR go on this site:
http://www.usinflationcalculator.com/ Calculator CPI dollar, result in today = U $ 1.63. CPI gave 62.7%!
For today’s price I calculated, the fair and corrected dollar is costing R $ 3.35.
And the price of the dollar today in the market is at $ 3.25 (I always see the website www.dolarhoje.com)
So TODAY 02/08/2016 the price of the dollar is legal to make a shipment abroad or buy to travel.
Actually what really matters is you understand the mechanism of how the calculation works and can always do it with any currency when investing in assets abroad (which is my case that I always intend to).