Costa Rican central bank takes action to control surge in dollar

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.

Thursday, July 17, 2008

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 lower band (the price at which the central bank buys dollars) will, however, remain fixed at 500 colons.

More on this topic

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.

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.

Costa Rica central bank under fire from business leaders

May 2008

Costa Rica's central bank has become involved in a dispute with the private sector whose leaders accuse the financial authorities of failing to make clear how the new exchange-rate system will work.

Business leaders were unhappy with the central bank's intervention in the wholesale dollar market, and accused the bank's governor, Francisco de Paula Gutiérrez, of offering an explanation "that explains nothing".

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