Tuesday 7 February 2023

Central Bank attemps another “frenazo” on the dollar exchange

On Tuesday the Banco Central invested an additional US$8 million dollars n order to avoid at all costs that the price of the dollar with respect to the colon reaches ¢700

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Dollar Exchange

¢574.12 Buy

¢581.69 Sell

7 February 2023 - At The Banks - BCCR

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QCOSTARICA – In order to avoid at all costs the dollar exchange reaching ¢700 colones, the Banco Central de Costa Rica (Central Bank), made a new intervention on Tuesday, this time for US$8 million.

The value of the dollar has trended upwards since 2020 due to the shocks that the country has suffered; Between March 2020 (start of the pandemic) and May 2022, the price increase has been 20%

On Monday, it also did so by trading US$7.8 million through the Monex market, where the Central Bank participates, where banks, companies and individuals trade amounts greater than $1,000.

The amount sold on Tuesday was made a “stabilization operations” that is not used very often.

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The Central Bank also sells (or buys) the foreign currency it requires from its monetary reserves to the public sector and then replenishes (or sells) them in this market. This week the Central Bank has sold US$31.7 million to the public sector but has not bought those currencies in the Monex to avoid greater pressure. on the exchange rate.

Despite the Central Bank’s efforts, the exchange at commercial banks at the close on Tuesday, at both state and private, was only a few colones from the ¢700 mark.

The price of the dollar has been rising since January 2022. On May 3, the dollar exchange reference rate set by the Central Bank was ¢662.86 for the buy and 670.10 for the sell; this Wednesday morning, June 1, it is ¢684.90 and ¢692.90, respectively.

A number of commercial banks reported they noticed a strong demand for the U.S. dollar, both at the level of internal customers and the wholesale market.

“The foregoing may be due to a combination of factors, such as the exacerbation of exchange expectations of economic agents that require foreign currency and seek to buy it before the price of the currency increases more, greater uncertainty regarding the evolution of the type of change and to specific requirements by some participants of the exchange market related to the end of the month”, indicated Rossy Durán, Corporate Finance Manager of the Banco de Costa Rica (BCR).

The president of the Central Bank, Róger Madrigal, explained in an interview last week with La Nación, that the increase in the exchange rate responds to a greater demand for foreign currency because the price of imports rises more than that of exports. (deterioration in the terms of trade), greater demand for dollars from the public sector and from people who buy dollars to pay their debts in that currency, among other factors.

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