Colón hits all-time low against dollar

July 11, 2008

The colón made history yesterday, but few Ticos are cheering as the national currency hit a historic low against the U.S. dollar, trading on the money market at an average ¢543.41 per dollar, according to Central Bank figures.

On Monday, the currency was trading at ¢528.84, ¢14.57 difference from Tuesday´s mark and a 2.8 percent drop in a single day. The colón traded at ¢522.52 last Tuesday, or 4 percent stronger than the this week.

For the past month, the colón had been floating at an average ¢520 per dollar.

The Central Bank intervened at the end of May the last time the colón plummted on MONEX, the money market in which banks trade currency.

At that time, banks bought colones at a rate of ¢527.82 per dollar and sold the national currency for ¢520.63 per greenback.

To prop up its ailing currency, the Central Bank dumped around $600 million in reserves from May to early June, flooding the market with dollars and calming demand.

Brokerage firm Aldesa reported that the Central Bank´s reserves dropped by another $82 million over the past week.

Central Bank President Francisco de Paula Gutiérrez said a good indication the institution has intervened in the market is a large volume of trades on MONEX.

He defected a question on whether the bank had intervened recently.

“The bank has said that it reserves the right to intervene when it considers it necessary,” Gutiérrez said.

“The bank does not try to modify the trends of the exchange rate with its exchange policy,” he added. “But it also does not want there to be big episodes of volatility (on MONEX), because that causes a lot of noise in the system.”

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