Q COSTARICA—If you earn income in colones and have expenses in dollars, the market offers you significant relief.
On Monday, a huge influx of foreign currency pushed the dollar exchange rate down to its lowest level in 17 years, a change that works in favor of consumers and anyone with dollar debts.
An extraordinary supply of foreign currency caused the dollar exchange rate to drop to its lowest point in the last 17 years, a phenomenon that benefits consumers and debtors in dollars.
The Foreign Exchange Market (Monex) registered an unprecedented session on Monday. A total of US$142.1 million was traded, the highest figure in history since records began in 2007, surpassing any previous record.
The drop could have been greater were it not for the active participation of the Banco Central de Costa Rica (BCCR)—Central Bank, which acquired almost all of the traded currency to bolster its reserves.
The Role of the Central Bank
The monetary authority had to absorb the vast majority of the dollars that flooded the market to prevent an even more abrupt collapse.
“The Central Bank absorbed US$131 million, nearly 92% of the total. This means that 9.2 out of every ten dollars traded today on the Monex exchange were acquired by the monetary authority, in this case mostly for its own reserves,” explained BCCR manager Pablo González.
According to González, who became General Manager of the Central Bank on March 14 this year, appointed by the BCCR Board of Directors, this intervention served as a safeguard. He clarified it wasn’t artificial stabilization but rather purchases made to fulfill the institution’s own needs.
Why are there so many dollars in excess?
The market is facing several factors that are increasing the availability of the US dollar.
Among the likely causes are treasury movements by multinational companies and conversions to meet obligations such as the Aguinado (Christmas bonus) payments.
“The downward adjustment reflects a market with more sellers than buyers. In an environment where private demand remains subdued, large corporate transactions can generate price movements,” González added.
Looking ahead to the end of the year, the outlook suggests that the abundance of dollars will continue. December is traditionally characterized by a strong inflow of foreign currency, driven by the peak tourist season and the payment of bonuses and the closing of corporate tax returns.
“Episodes of ample supply—like today’s—could be seen again if the timing coincides with large-scale transactions,” the specialist concluded.
Today, the dollar exchange fell to ¢496.07 for the buy and ¢499.82 for the sell as reported by the Banco Central.