Costa Rican Central Bank Intervenes in Foreign Exchange Market

The monetary authority has launched a scheme to acquire international reserves, immediately causing the exchange rate to rise.

Thursday, September 2, 2010

In his blog for the analyst Jorge Guardia highlights that this intervention represents a trimming and sprucing within the limits and a fundamental change in Central Bank (BCCR) policy that lacked due transparency.

BCCR's report circulated to the Costa Rican financial system stated that the economy's current status makes this an opportune time to initiate a scheme to cautiously acquire foreign exchange reserves, given the prevailing uncertainty in international financial markets. It also adds that between 2 September 2010 and 31 December 2011 it plans to purchase reserves through MONEX worth up to $600 million, equating to approximately $50 million per month.

Rodrigo Bolaños, BCCR president, had told on 19 August that this kind of action could raise the exchange rate but that the need to print more colones could also affect inflationary goals.

More on this topic

$150 Million from IMF to Honduras

September 2009

The Central Bank of Honduras informed they increased their monetary reserves with these $150 million.

By providing this funds as special wire rights, the International Monetary Fund (IMF), becomes the first international entity recognizing Honduras interim government.

"The loan, in concession conditions, is part of the international support program by G-20 for developing economies.

$150 Million for Nicaragua

August 2009

The country will strengthen its international reserves with a loan by IMF.

The loan was officially communicated by the Central Bank of Nicaragua, who added that: "...these resources provided by the International Monetary Fund will help Nicaragua consolidate its macroeconomic framework by strengthening its international reserves, reinforcing the country's financial security network and easing the impact of the global financial and economic crisis", reported

Costa Rica: Less International Reserves

July 2009

The country's international monetary reserves were down $53.3 million last week, standing now at $3.931 million.

This drop is a result of the intervention by the Central Bank in MONEX, the wholesale currency market. To prevent the exchange rate from surpassing the fixed upper limit, the bank sold $32.8 million last week in this market.

Costa Rica's international reserves dropped by $92 million

October 2008

The Central Bank's international monetary reserves continued their descent from September 29 and October 3, falling by $92 million.

The current balance is the lowest since June last year.
The Central Bank continues to use its reserves to defend the ceiling (the maximum selling price of the US dollar) of the exchange rate system, since the exchange rate in the wholesale market has been stuck at the top for the last two months due to the high demand for currency in the market.

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