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The “YoYo” Dollar Exchange Rate: ¢18 Colones Drop In Three Days

Q MONEY – After hitting almost ¢600 Colones to one US dollar last week, the reference rate today is down ¢17.82 Colones, to ¢582.87.

The drastic drop began Thursday morning when the Banco Central (Central Bank) said it would use up to US$1 billion dollars of its dollars reserves to shore the Colon.

On Thursday, May 25, the reference exchange rate by Central Bank was ¢598.49 for the sell and ¢585.56 for the buy. At some private banks, like the Scotiabank, the exchange rate was ¢600 for the sell.

On Monday, the Central Bank continues with its increased intervention, to stabilize the market.

The Uncertainty

Economists José Luis Arce and Ronulfo Jiménez told La Nacion, with these oscillations, people now feel the uncertainty that exists in a managed flotation system.

For Arce in periods with volatility, or pressures for depreciation, people perceive or feel the foreign exchange risk in the flesh and the normal thing is that they internalize it, at least temporarily investing in dollars or not take our loans in dollars.

“The bad thing is that generally if the situation or the market does not continue sending signals that there is no exchange guarantee whatsoever, the economic agents forget quickly and soon they increase again their exposure,” he said.

An example is when the Central Bank intervened a lot to moderate the volatility or as now, that is intervening with great intensity and is almost fixing the exchange rate, indicated Arce.

Source BCCR