U.S. dollar becomes stronger as Fed reduces bond purchases

Expats can expect another bump in the colon-dollar exchange rate because the U.S. Federal Reserve decided Wednesday to reduce by $10 billion its monthly bond purchases.

This is the second time that the Fed reduced the amount of bonds it would buy. The central bank had been purchasing $85 billion a month. In February the central bank will buy $65 million. The reductions will take place each month until in December the Fed will purchase the last $15 billion.

The bond purchases were designed to bolster the sagging U.S. economy and keep interest rates low.

The first effects of the announcement were felt on Wall Street where the Dow Jones Industrial Average closed nearly 200 points lower.

Earlier today in Asia stocks were down. As the program tapers and interests rates edge higher, analysts worry investors will pull their money from emerging economies and seek higher returns in the U.S., according to wire service reports.

The value of the dollar jumped eight colons to 516 on the MONEX market during the day. The Banco Central was quoting the dollar at 518.14 colons to purchase at the end of the day. Selling a dollar would bring 505.13 colons.

In prices posted for this morning, Banco Nacional was quoting the price to buy a dollar at 523 colons. Those selling dollars would get 509 colons for each one.

The increase  is about 15 colons from the currency prices for months, about 3 percent.

Bankers are reasoning that with fewer dollars being pumped into the U.S. economy, the value of the greenback will rise. In addition, there is far more effort being expended now to halt money laundering, something that has been depressing the value of the dollar here for years.

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