Q COSTA RICA — The dollar exchange rate continued its downward trend, reaching ¢448.96 last Friday, its lowest level since the Banco Central de Costa Rica (BCCR) — Central Bank — began tracking the historical series for the Mercado de Monedas Extranjeras (Monex) — Foreign Exchange Market — in December 2007.
The rate decreased by ¢0.21 compared to Thursday and accumulated a drop of ¢3.07 compared to the ¢452.03 recorded a week earlier.
According to economic analyst Daniel Suchar, one of the factors explaining the recent behavior is the increased demand for colones that typically occurs every two weeks with salary payments.
“What we are seeing is a bi-weekly effect that repeats itself precisely with that frequency,” Suchar explained.
The analyst noted that, for now, no measures have been implemented to reduce the pressure facing the foreign exchange market in Monex.
“We continue to experience a considerable delay in adjusting interest rates, since although the monetary policy rate has fallen to 3%, this does not mean that we will see any impact on the exchange rate in the short term,” he added.
According to Suchar, the reduction in the Tasa de Política Monetaria (TPM) — Monetary Policy Rate — does not necessarily generate an immediate effect on the price of the dollar, so the current pressures could persist for the next few weeks.
“Therefore, we must understand that we will continue to see these pressures to buy colones every 15 days until the Central Bank’s board of directors makes a much stronger decision and the legislature takes actions that reduce pressure on the exchange market,” he stated.
Last week’s performance has been particularly significant, as the dollar established new all-time lows in four of the five trading sessions.
Furthermore, the current behavior is pushing the exchange rate to levels not seen for more than two decades.
Suchar believes it will be necessary to observe both the decisions made by the Central Bank and any measures taken by the Legislative Assembly to determine if the pressures on the foreign exchange market begin to ease.
“That’s where we’ll see some significant impact on the exchange rate,” he concluded.
The fall of the dollar represents relief for those with expenses or debts in that currency, but it creates pressure for exporters, tourism-related companies, and other sectors whose income depends heavily on dollars.