5% jump in Costa Rica's currency raises eyebrows

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.

Tuesday, July 22, 2008

Under this system, the external shocks are absorbed by the exchange rate, says Quirós.
The international economic and financial situation, complex and volatile, is testing the effectiveness of the Central Bank's monetary policy in fulfilling its goals of controlling inflation and maintaining a competitive exchange rate.
The Costa Rican colon closed Tuesday at 517.93 to the dollar, after spending most of last week near the 550 mark.

More on this topic

The price of the US dollar in Costa Rica

January 2009

After in the increase in the growth rate of the ceiling of the exchange band, the reference exchange rate continues to be close to the ceiling.

Nacion.com reports: "The weighted average price (considering the amount traded at each exchange rate) of the wholesale market (Monex) at the end of the day was at 562.28 colones per dollar, very close to the ceiling of the band, which was at ¢563,65 yesterday."

Costa Rican central bank takes action to control surge in dollar

July 2008

The Costa Rican central bank, the BCCR, modified its exchange-rate policy in an effort to control a surge in the value of the US dollar on local money markets.

Under the country's currency-band system, the upper band (the maximum price at which the central bank sells dollars to intermediaries) has been set at 555.37 colons and will be increased daily by six céntimos.

The dollar takes off in Costa Rica as the colón flounders

July 2008

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

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.

Costa Rican central bank defends currency bands

June 2008

Amid growing criticism of the currency bands used to control the value of the colon, the Costa Rican central bank defended the system.

The bands are not an end in themselves, said the bank's president, Francisco de Paula Gutiérrez. Rather, they are a stage in the transition to a floating exchange rate.

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