Friday 27 January 2023

Dollar drops ¢10 this week due to year-end seasonality

The average price of foreign currency in the Monex market closed at ¢ 600.45 this Friday, November 20

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Dollar Exchange

¢556.75 Buy

¢563.87 Sell

27 January 2023 - At The Banks - BCCR

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QCOSTARICA – The dollar exchange fell ¢10.38 this week as a result of the traditional sales of foreign currency made by companies to pay bonuses and other end-of-year commitments.

People walking in front of the Banco Central (Central Bank) building in downtown San Jose

This is how two economists consider it: Noberto Zúñiga, from Ecoanálisis and the Academia de Centroamérica, and Pedro Aguilar, a consultant on economic issues.

The weighted average of the currency in the Monex Market closed the week at ¢600.45 and returned to the value it had last September. The sell price of the currency reached a maximum this year, of ¢616.45, on November 11 and ¢610.85 for buy on November 12.

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“These weeks have seen a normal behavior of the Costa Rican dollar exchange market, in which for these times of the year and towards the middle of December, the supply of dollars increases, as transnational companies begin to prepare for the payment of the Aguinaldo (annual year-end bonus or thirteenth salary, an extra payment given to employees in December), offering their dollars to have colones, so that the exchange rate tends to fall. This is known as seasonality,” Aguilar said.

“The behavior is clearly seasonal, similar to what happened in previous years. But the unjustified abrupt appreciation of the colon this week is striking. It decreased a little more than ¢10 without improving the external position of the country,” considered Zúñiga.

The Banco Central (Central Bank) intervenes in the Monex market in several ways. One of them is with public sector negotiations: it sells or buys dollars from public sector entities and then replaces or places them in Monex.

In recent weeks, the Central Bank has sold the required currencies to the public sector, but has not bought them at Monex. This week it changed the policy and supplied the public sector with US$24.2 million and acquired US$42.4 million in Monex.

“It is not a downward trend because large fiscal imbalances persist, a fall in monetary reserves and the possibilities of an eventual downgrading of risk ratings if corrective measures are not adopted as soon as possible,” Zúñiga said.

The dollar exchange at the Central Bank this Saturday morning, November 21, is ¢603.63 for the sell and ¢597 for the buy. Last Saturday morning, November 14, it was ¢613.41 and ¢606.51, respectively.

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