Dollar weakens slightly despite pressure to contrary

The U.S. dollar is weakening slightly against the Costa Rican colon.

The value still is better than this time last year, and there are significant improvements expected ahead.

Last Dec. 20 the buy/sell rate was 493.29 and 505.78.

The value of the dollar began to improve after Jan. 2 and skyrocketed through February until the rate was 555.79 and 570.79 in March. This was a 65-colon increase in just two months. That was about 13 percent, enough to cause strains in day-to-day businesses.

For today, the Banco Central has posted a 527.72 and 539.49 rate and some entities, such as Banco Nacional, are quoting prices one or two colons lower.

There have been two major changes since the dollar put on muscle earlier this year. In late June the Banco Central de Costa Rica decided that public companies that are not banks could no longer trade on the daily Monex market. Basically the exchange rate is now a banker’s monopoly. The bank’s board also decided that purchases of U.S. dollars for the public sector would no longer be reflected in the exchange rate.

The central bank made the changes in order to george121814reduce volatility, it said. Until late June anyone  with a need for dollars could attend the daily Monex auctions to make purchases. As the U.S. Federal Reserve reduced the purchase of bonds to help the economy there, the dollar increased in value.

Eventually the central bank will have to pay the piper. The bank reported in early December that its dollar reserves have been depleted by some $120 million. The country has an unfavorable exchange rate in that it purchases more from other countries than other countries buy here. That includes foreign Christmas credit card sales that will have to be settled in dollars starting next month.

The big expenses, of course, are petroleum imports, some of which is used for power generation by the Instituto Costarricense de Electricidad.

This entry was posted in Costa Rica News. Bookmark the permalink.