The dollar takes off in Costa Rica as the colón flounders

The value of the dollar has risen by 11 percent against the Costa Rican colón over the last three months.

Wednesday, July 16, 2008

Yesterday, the exchange rate closed in several banks at 555 to the dollar. The central bank narrowed the band within which the rate is allowed to fluctuate and adopted measures to control liquidity.
Financial market sources say several factors are at play. They include excessive colón liquidity combined with a dollar shortage; changes in the public's expectations; doubts over the US economy, and a growing trade deficit.

More on this topic

Dollar Causes Headaches in Costa Rica

February 2014

The discretionality of interventions made by the central bank in the foreign exchange market could open the gate for unjust enrichment of those who have inside information.

EDITORIAL

In the best of democratic worlds, the intervention of public employees in the economy generates income transfers between the sectors within the economy, according to state policies that are largely accepted by the population.

The Upward Pressure Continues on the Dollar in Costa Rica

March 2009

The Central Bank of Costa Rica continues to intervene in the market to prevent the price from exceeding the upper limit of the current bands.

In its report "On the Market Today," Aldesa group reported that, "The Central Bank of Costa Rica continues to intervene in the foreign exchange market by selling dollars.

Costa Rica: Dollar is Quoted Above Set Bands

February 2009

On Tuesday, the 10th, in the wholesale market (MONEX), the exchange rate reached ¢566.85, surpassing by one colón the set ceiling as determined by the BCCR (¢565.85).

The exchange rate has remained pegged to the upper band in the last few weeks. This situation and the increase in the volume of transactions reflect the resurgence of the demand for dollars.

5% jump in Costa Rica's currency raises eyebrows

July 2008

The tumble of 5 percent in Costa Rica's exchange rate in a single day has caused some observers to question the model of maintaining an exchange rate range, says Melizandro Quirós in a column in the web site Nacion.com.

Under this system, the external shocks are absorbed by the exchange rate, says Quirós.

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