The pataca was first introduced in Portuguese Macau and Portuguese Timor in the year 1894, but only as a unit of account for the silver Mexican dollar coins that circulated widely in the region at that time. In 1894, Macau and Portuguese Timor constituted one single administrative entity, but in 1896 Portuguese Timor became autonomous from Macau. In those days there was no single currency in circulation in Macau and East Timor, and trade was dominated by the silver dollar coins, not only of Mexico, but also of China, as well as the British silver trade dollars that were minted for use in Hong Kong and the Straits Settlements. In East Timor, the 2½ Gulden coin of the neighbouring Netherlands East Indies also corresponded to a silver dollar. In 1901 in Macau, it was decided to create a purely local currency, and the authorities granted the Banco Nacional Ultramarino exclusive rights to print legal tender banknotes. These pataca banknotes were launched in 1906 at a sterling value of 2s 4d — the same as the new Straits dollar that was issued in that same year. As in the Straits Settlements, all foreign coinage was outlawed, with the intention that the new currencies should establish their own market values. The Chinese were suspicious of these paper patacas, being accustomed to using silver for barter, and so the paper patacas always circulated at a discount in relation to the silver dollar coins. These Macau banknotes also circulated in East Timor, but in 1912 they were supplemented by local Timor issues for the first time. While the pataca continued at a discount to the silver dollars that were used in silver standard countries such as China and Hong Kong, the Straits dollar was pegged to sterling in a gold exchange standard, so the two currencies then floated apart. In 1935, when China and Hong Kong abandoned the silver standard, the pataca was pegged to the Portuguese escudo at a rate of 1 pataca = 5.5 escudos, making it equivalent to the British shilling and putting it officially at a 3d sterling discount in relation to the Hong Kong unit, and at a 1s 4d discount in relation to the Straits dollar. In 1942, during the Second World War, the pataca was replaced by Japanese issues of the Netherlands Indies gulden at par. The gulden had been on the gold standard until the 1930s, and had risen in value against the pataca so that the pataca was now closer in value to 1 gulden rather than the 2½ gulden rate that had prevailed around 1900. When the pataca was reintroduced in 1945, it was pegged to the Portuguese escudo at a rate of 5.5 escudos = 1 pataca and fractional coins denominated in avos were issued for the first time. In 1951, minting of avo coins ceased, even though in 1952 a full set of pataca coinage, including coins denominated in avos and also a pataca coin, was issued in Macau. In 1958, the pataca was replaced by the escudo at the rate of 1 pataca = 5.6 escudos. In 1975, Portuguese Timor was invaded by Indonesia, and Indonesian currency was introduced. When this territory was established as an independent state in 2002, the US dollar was made the official currency. The US dollar was also descended from the Spanish pieces of eight but it broke parity with the silver dollars of south-east Asia and Latin America following the great international silver devaluation of 1873.
Coins
In 1945, bronze 10 avos, nickel-bronze 20 avos and silver 50 avos coins were introduced. The sizes of these coins matched the Portuguese 20 centavos and 1 and 2½ escudos. Coins were issued until 1951.
Banknotes
In 1912, the Banco Nacional Ultramarino introduced notes in denominations of 1, 5, 10 and 20 patacas. 25 patacas notes from Macao also circulated. In 1940, notes of 5, 10 and 50 avos were introduced. Some of these notes were overprints of Macanese notes, as were the 5, 25 and 100 patacas notes introduced in 1945. The same year, specific issues for Timor were introduced in denominations of 1, 5, 10, 20 and 25 patacas, followed by 20 avos in 1948.
