The central bank chief said that if conditions are right, it could "migrate" to a managed floating exchange rate system.
After taking measures such as eliminating purchases by the non-financial public sector in the Monex wholesale market and intervening in the market to minimize volatility and increase stability in the exchange rate, Olivier Castro, president of the Central Bank, ".. . no longer considered it necessary to strengthen the exchange rate bands and believes that if the right conditions are presented the country should move towards a managed floating of the dollar. "
In the last 30 days the price of the dollar against the Colon went from 557 colones to 540.4 colones in the Monex wholesale market.
The decision to remove the non-fiinancial public entities from the wholesale market and less demand for foreign currency in recent weeks are the reasons for the drop of 17 colones in the price of the dollar.
A proliferation of articles, reviews and editorials on the exchange rate is the best example of the prevailing concern in a market waiting for a clear definition of the exchange rate policy by the Central Bank.
In recent weeks, and while the President of the Central Bank of Costa Rica (BCCR) is denying it , warnings have been given over interventions in the foreign exchange market by the monetary authority. Under the supposed premise of preventing undue fluctuations in the exchange rate, the BCCR is intervening daily in a market where there aren't any fluctuations that warrant such intervention.
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.
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.
Costa Rica: the problem is international rates, the exchange rate, the fault of the hot capital, state banks ...
EDITORIAL: As in the illegal street scam known as the ‘shell game’ (three shells/cups/thimbles placed upside down move around while a person guesses under which one the ball is hidden – in the end it is not under any of them), government officials, economists and analysts of all types, are pontificating on whether the ball of the solution to the serious monetary and currency problem in Costa Rica is under one or other of the various vessels that move quickly inciting the innocent to bet on which one it is hidden under.
Representatives of business associations have proposed ten measures to prevent the entry of speculative capital into the country and to provide flexibility to the exchange rate without local currency appreciating.
Elfinancierocr.com reports that "Business representatives this afternoon delivered a plan with 10 steps to curb the heavy influx of foreign capital", among which was "a tax on speculative capital inflows, in addition to promoting a specific tax on remittances sent abroad, of 5% for national banks and 5% for ‘suitcase’ banks".
Honduras' industry is asking government to contain spending, in order to curb the depreciation of the currency and rising interest rates.
In late July 2011, the Central Bank of Honduras (BCH in Spanish) reactivated the exchange rate band system, a scheme under which the dollar fluctuates between two bands, established by the entity that has the power to buy dollars if the exchange change goes towards the lower band, and sell if it is located in the upper limit, in order to increase supply and push the exchange rate lower.
The price of the dollar against the Colon has again started to fluctuate, after having spent several weeks at a relatively stagnant level.
In the last two weeks there has been a slight rise, of about six colones, at the banks exchange desks.
However, this rise has not appeared the way it normally does, ie first in the Monex wholesale market, where trading banks and financial institutions do business, and then in the exchange rate offered to the end consumer at exchange desks.
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