Central Bank Intervenes
As Colon Slides
Costa Rica's central
bank - the Banco Central
de Costa Rica - said on
Friday it was obliged to
pump dollars into the
monetary system,
intervening to halt the
continuing rise in the
exchange rate, as the
Colon hit an all time
low of ˘527.82 to the
U.S. dollar.
The end of the high
tourism season and a
seasonal drop in trade
has been the cause for a
shortage of dollars in
the Costa Rican market,
sending the Colon
plummeting.
"We are in a period of
the year where the
amount of dollars in the
market tends to fall,
and some banks
over-reacted (buying up
dollars) and we saw it
necessary to intervene,"
central bank economist
Jorge Madrigal said.
This is the second time
in two weeks that the
central bank has
intervened in shoring up
the Colon, intervening
for the first time since
the new exchange rate
system was brought in.
In 2006, the central
bank replaced a fixed
reference rate policy
that had been used to
gradually devalue the
Colon over two decades
and set a reference band
of a high and low for
financial institutions
to set the exchange
rate.
Last November the
Central Bank widened the
bands, setting the floor
at ˘498.39 and the
ceiling at ˘562.83.
Until the bank
intervened on May 8, the
dollar gained on the
colon when the Banco
Nacional (BN) opened its
doors with a ˘5 colones
increase in the sell
rate. The Banco de Costa
RIca (BCR) and private
banks followed suit to
hit the record set on
opening Friday.
The exchange rate dipped
slightly during the day
on Friday, closing at
˘519.30 for the sell and
˘526.27 for the buy. |
