Brazil's currency tumbled 1.4 percent on Tuesday, one day after the government announced it would charge a financial tax on capital inflows.

The real (BRBY) stood at 1.737 per dollar.

Finance Minister Guido Mantega said on Monday that the government would charge a 2 percent financial transactions tax on foreign investment flows to Brazil's stock market and local fixed-income securities in a bid to prevent the country's currency from strengthening further. The tax would take effect on Tuesday.

Analysts said the real, one of the world's best-performing currencies against the dollar this year, will show resilience against the measures as investors shun the dollar globally. The government is concerned excessive gains in the real may dent the competitiveness of Brazilian goods overseas, thwarting an incipient economic recovery.

I think the impact is more in the short-term, said Marco Antonio Azevedo, currency trader at Brascan Gestao de Ativos.

In the long-term, the internal fundamentals continue to prevail and the real continues to strengthen.

Brazil's real has rallied about 34 percent so far this year against the dollar. The government has repeatedly said it was worried about the strength of the local currency which was making exports expensive.