QCOSTARICA – The dollar exchange rate has been on a downward trend since a high of ¢700 colones to one US dollar in June, and the tanking intensified in the past ten days.
According to the official data of the Banco Central (Central Bank), the dollar exchange reference rate for the sell dropped from ¢675.96 on August 10 to ¢655.03 this Saturday, August 20; the buy from ¢668.49 to ¢647.81, respectively.
At the commercial and private banks, the sell is between ¢654 (Banco Nacional and BCR) and ¢662 (Banco Improsa); the buy is between ¢638 (Scotiabank) and ¢644 (Banco Cathay). See here the complete list of the exchange rates at banks and other financial institutions as reported to the Central Bank.
A couple of months ago, in June to be exact, the average exchange rate was a few colones from reaching ¢700. Several financial institutions surpassed that mark, with a ¢702 rate for the sell.
Read more: Dollar exchange resists going above ¢700
What caused this drastic change in such as short period of time?
At the end of July, the Central Bank presented its Informe de Política Monetaria (Monetary Policy Report), describing a series of measures recently adopted that could be contributing to the drop in the exchange rate.
Among them are the improvement in the programming of Sector Público no Bancario (SPNB) – Non-Banking Public Sector– operations, the placement of debt of BCCR bonds in foreign currency in the local market to avoid dollars leaving the country, the request for a loan of a US$1.1 billion dollar loan from the Latin American Reserve Fund (FLAR), which has been approved, and the reduction in the hours of the Mercado de Monedas Extranjeras (MONEX) – foreign currency market, also known as the wholesale market.
In addition, the exchange rate is influenced by more tourist dollars entering the country, in the first half of 2022, foreigners visiting Costa Rica contributed US$1.54 billion to the local economy, in contrast to the US$1.66 billion for all of 2021, and a drop in the price of fuels at the international level, meaning less demand for dollars by the Costa Rican refinery that refines nothing, the Refinadora Costarricense de Petróleo (RECOPE).
Economist William Porras told La Nacion the wake-up call and the actions taken by the Central Bank “had a persuasive effect on the foreign exchange market”.
“The rise in interest rates in colones that generates a premium for investing in this currency, still low, but sufficient against inflation. There is also an issue of expectations, exporters want to liquidate their position in dollars and importers buy at the lowest moment (of the price of the dollar) so there is an alignment,” said the economist.
Where is the dollar exchange headed?
Predictions are that will again start to rise and close the year near the ¢700 mark.
In our report of August 11, experts at the Colegio de Ciencias Económicas project that, in the best of cases, the dollar exchange rate sell price could be maintained at ¢675, but could also reach ¢695 by the end of the year.
That was before the drop of more than ¢20 colones in the past week.