Because of the uncertainty in the local economy, so far this year in Guatemala the Quetzal has depreciated just over 5% against the U.S. dollar.
According to Banco de Guatemala figures, between January 1st and December 19th, 2018, the reference exchange rate increased from Q7.34 to Q7.75. This upward trend contrasts with the reported last year, since during 2017 the exchange rate dropped from Q7.53 to Q7.35.
So far this year the average price of the US currency against the Quetzal has dropped from Q7,52 to Q7,33, reaching the lowest value since 1999.
While the flow of remittances from Guatemalans abroad continues to grow, the exchange rate can not change the clear downward trend seen year after year since 2013.Figures from the Bank of Guatemala indicate that during that year, the average monthly exchange rate stood at Q7,87 per dollar, dropping to Q7,74 the following year, closing at Q7,67 in 2015 and last year at Q7,62 per dollar. [GRAFICA caption = "Click to interact with graphics"]
By changing the exchange rate rule and issuing certificates of deposit in dollars, the Banguat aims to minimize the downward trend that has been seen for months in the price of the dollar against the Quetzal.
An increasing inflow of remittances coming into the country is the main reason behind the excess of dollars in the economy, a figure that the Bank of Guatemala has estimated at $1 billion.
Although the export sector continues to denounce the loss of competitiveness because of appreciation of the quetzal against the dollar, the Central Bank insists that the exchange rate will remain dependent on market factors.
A year ago the complaint was the same.Exporters asked the Central Bank for a review of the exchange scheme to induce a devaluation that would allow them to recover some of the competitiveness lost abroad because of the exchange rate.The situation today has not changed, and exporting companies have asked for the Ministry of Agriculture to intervene in this matter.
In the first nine months of the year the Bank of Guatemala has intervened in the exchange market with $1 billion in order to keep the Quetzal from appreciating further.
The increasing flows of remittances coming into the country are the main reason behind the appreciation of the Quetzal against the Dollar. So far this year the Bank of Guatemala has had to intervene by acquiring more than $1 billion, thus increasing monetary reserves.
Exporters resent the strength of the local currency against the dollar, which reduces competitiveness at a time when export volumes are falling.
Since the beginning of the year until mid-August, the price of the Quetzal against the dollar has gone from Q7,63 per dollar to Q7,50, a difference of 13 cents resulting in a decrease of competitiveness for exporters and sectors that generate revenue in the US currency.
Strong growth of remittances and savings in the oil bill are two of the factors responsible for an increase in the supply of dollars which is putting downward pressure on its price against the quetzal.
Appreciation of the Guatemalan currency against the US currency is also due to lower demand for dollars in the local market, according to statements made by the president of the Bank of Guatemala to S21.gt.
In order to moderate the decline in the dollar the Bank of Guatemala has made two interventions so far in 2015.
During 2013 the Guatemalan currency gained about 3% against the dollar, making exports less competitive. Due to the fact that the trend has continued, the Bank of Guatemala has started to apply the rule of exchange participation in order to moderate behavior of the currency.
The increase in remittance income is the main factor that has led to the value of the local currency against the dollar rising to its highest level in the past two years.
While in other Central American countries local currencies have tended to lose value against the dollar, in Guatemala the strong flow of foreign exchange into the country has put upward pressure on the supply of dollars causing an appreciation of the quetzal, which was quoted on 5 October at Q7,63 to the dollar.
Since August the quetzal has been appreciating against the dollar, mainly due to an increase of foreign exchange coming into the country in the form of remittances.
Although in the first eight months of the year the exchange rate against the dollar was stable, from August the trend began to change and the national currency began to appreciate.
The president of the Bank of Guatemala (Banguat), Julio Suarez S21.com.gt told that "...
Investors are focusing on local currency due to its renewed value and the issuance of bonds at higher interest rates.
Elperiodico.com.gt outlines, "The Bank of Guatemala (Banguat), informed that payments in foreign currencies reached Q21.3 billion in December and Q23.0 billion during February, while payments in Quetzals went from Q106.2 billion to Q105.6 billion over the same period of time.
After showing constant growth during 2007 and 2008, inflation indexes slowed down considerably in the second half of 2009.
The Executive Secretary of the Central American Monetary Council presented its 30th Regional Economic Update. In it, they calculate how much inflation was indirectly imported by the Central American countries.
For this, they elaborated indexes of the various components which explain price changes in the past years.
For the first time in at least two years, the Bank of Guatemala had to sell $4.1 million in the Electronic System for the Negotiation of Currency, in order to stop the rapid appreciation of the currency.
As of September 30, the exchange rate of reference was at Q7.47181, however in the first eight days of October is went up to Q7.58238 per US$1.
The sale of dollars by the central bank happened last Tuesday and the objective was reached.
Not only the euro and the pound sterling have been strengthening against the US dollar, so have Central American currencies, above all Guatemala's quetzal.
The Honduran lempira and Costa Rica's colon have also been gaining against the dollar, though not by as much as the quetzal.
The flow of hard currency from the United States to Central America has stepped up considerably in recent months, bolstering the value of the region's currencies.