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Banco Central Proposes Change in Method for Calculating Exchange Rate

The Central Bank proposes a modification in the way it calculates the dollar exchange rate

Q COSTA RICA – Costa Rica’s Central Bank (Banco Central de Costa Rica – BCCR) proposes modifying the methodology to more appropriately approximate the average reference exchange rate of all exchange transactions in the economy.

The reference exchange rate (buying and selling the dollar) is an average of the daily prices of financial intermediaries, including banks, cooperatives, mutuals, financial institutions, exchange houses and stock exchanges.

Up to now, to calculate both prices, the Central Bank takes into account only the exchange rates announced to the public at 2pm and 5 pm each day. The resulting value is considered the reference exchange rate for the following day.

However, the new methodology considers the exchange rates effectively negotiated over a longer period of time, between 10 am and 4 pm, in which traded volumes are larger and the differential between the average buying and selling exchange rates is lower.

In this way, a greater volume of operations can be monitored.

According to a statement sent by the Central Bank, this will be possible because the entity now has available online information on the foreign exchange operations that financial institutions have with the public.

The modification includes that at instead of calculating the reference rate taking into account the entity’s weighted exchange rate and the transactions of the last five days, the exchange rate will now be weighted according to the trade in each transaction.

According to the Central Bank, this modification will benefit many, especially those who use the reference exchange rate for different operations, including foreign currency contracts settled in colones, credit card payments and bank loans, among others.

For this Wednesday, May 3, the reference exchange rate of buy is ¢558.49 and the sell ¢571.14. The differential is ¢ 12.65.

The sell rate is the highest in the last three years.

Read full statement (in spanish) by the Central Bank of Costa Rica issued on Thursday, April 27, 2017.