Friday 12 August 2022

Dollar and euro are “practically” at the same price internationally: What can be expected in Costa Rica?

The Euro will continue to approach parity unless the ECB adopts a shock measure

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12 August 2022 - At The Banks - BCCR

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QCOSTARICA – The dollar and the euro are “practically” at the same price internationally, in the face of fears of a recession in European markets and the war between Russia and Ukraine.

This Friday the euro collapsed and was quoted at us$1.01, this being the closest figure to the dollar for 20 years. International experts predict that in a matter of days both currencies will reach parity.

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What can be expected in  Costa Rica?

Financial analyst, Jorge Benavides, explained that the country will have an indirect impact. Financial analyst, Daniel Suchar, explained that Costa Rica has international partners with whom it trades in euros, however, the country’s economy depends on what happens with the U.S. dollar.

“The Euro will continue to approach parity unless the ECB adopts a shock measure, such as a 0.50 percentage point hike” in its main interest rate, estimated Ipek Ozkardeskaya, an analyst at SwissQuote.

The dollar is further boosted by a more aggressive monetary policy by the US Federal Reserve (Fed).

“Growing fears of a recession send the euro lower, while the dollar rises on bets that the Fed will maintain its rate hikes aggressively to curb inflation,” City Index expert Fiona Cincotta told AFP.

And “PMI [composite purchasing managers’ index] data released [on Tuesday] in Europe highlighted the risk of a slowdown in growth at the end of the second quarter,” she added.

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Interest rates capped

On Friday, published in the official government newsletter, La Gaceta, the maximum interest rates for loans.

For loans in colones, the cap is 33.41% and for loans in dollars, it is 27.72%. In the case of microcredits, the maximum interest rate in colones is 47.23% and 39.32% in dollars.

 

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