That is a percentage point higher than in Turkey, where inflation is running well above Brazil's 6% or so a year, and where foreign-exchange reserves are much less plump.
International comparisons using official exchange rates can be misleading, particularly where the foreign exchange market is manipulated by governments.
That happens only when foreign exchange is rationed.
The stakes are high in a country where the main foreign exchange earnings come from Tongans living overseas sending money home to their families.
Where is the foreign exchange market?
As regards the covered interest-parity condition, Flandreau and Komlos (2006) provide an empirical study about early arbitrage transactions between Berlin and Vienna, where a forward foreign exchange market had already developed during the second half of the nineteenth century.
The initial impact was felt on the local currency market where a shortage of foreign exchange caused a looming crisis.
A scarcity of capital is pushing banks everywhere to concentrate on businesses that use less of it, such as trading foreign exchange, where the banks do not have to assume much risk, says Jason Napier, an analyst at Deutsche Bank.
It proved that in foreign exchange, where until the early 1990s transactions were conducted mostly by facsimile machine and phone.
