Central Bank Buys Up $$ in Record Numbers
The Central Bank bought up nearly half a billion dollars on the Costa Rican MONEX market during January, setting a record for monthly dollar acquisitions and signaling that pressure on the colón to gain more value against the dollar is still high. Total dollar acquisitions came to $442.2 million for the month.
Analysts say there are more dollars in the market due to a combination of maturing government bonds and investors switching dollar positions to colones on speculation that the Central Bank will allow the colón/dollar exchange rate to drop in the mid-term.
A flood of dollars in the Costa Rican market pushes up the value of the colón, something the Central Bank tries to control by purchasing those dollars and issuing colones.
That action, however, tends to increase inflation – something the Central Bank has committed to controlling for 2008 – fueling speculation that the bank will choose to lower the bottom limit on the exchange rate instead.
You may be interested
News briefs: Costa Rica will handle land borders differently than airportsAlejandro Zúñiga - July 9, 2020
The coronavirus crisis has transformed life in Costa Rica, which has enacted measures to protect the capacity of its health…
Costa Rica extends tourist visas until November 18Alejandro Zúñiga - July 8, 2020
Costa Rica's Immigration Administration is offering foreigners extra flexibility as countries continue to restrict travel due to the coronavirus pandemic.…