Dollar exchange rate at year low

QCOSTARICA – What happened to the rate of the dollar, which has fallen to its lowest point this year, after an all-time high in June?

The Banco Central (Central Bank) reference rate this Saturday, October 15 is 621.03¢ for sale and 612.79¢ for purchase. On June 23, the reference rate reached 698.44¢ and 691.20¢ respectively. See here the official dollar exchange rate at banks and financial institutions as reported to the Central Bank.

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In commercial, private and public banks, on this occasion it exceeded 700 colones ¢ for one American dollar. However, as of Friday, it was between 623¢ and 632¢, depending on the bank.

This is a drop of almost ¢78 colones in nearly four months.

The last time the colon was this low was in August 2021.

Financial analyst, Jorge Benavides, pointed out that this reveals an improvement in the country’s economy, and indicated that there is currently no pressure, influenced by a greater abundance of foreign currency in the private sector, we can therefore expect the exchange rate to fall even more.

The President of the Central Bank, Róger Madrigal, had pointed out in an interview with La Nacion, on September 23, several factors that influence the greater quantity of foreign currencies on the market: oil prices have fallen and RECOPE, the refinery Costa Rican oil company which does not refine anything, has reduced its demand for dollars, as have the pension operators. On the supply side, tourism has been very good this year.

Also influencing the drop in the exchange rate, the rise in interest rates paid on deposits in colones affects the demand for dollarization of savings.

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The Central Bank has not made any interventions in the foreign exchange market (MONEX) to stabilize the exchange rate since August this year.

What could reverse this trend is the Central Bank’s decision on further monetary policy adjustments scheduled for October 26 and the US Federal Reserve’s decision on November 2.

Juan Pablo Arias, an economist at the Bolsa Nacional de Valores (National Stock Exchange), told La Nacion that “all of this will be essential”.

“If the Central Bank of Costa Rica increases its reference rate, it influences the rates in colons to also increase and this discourages the demand for dollars; but if the (US) Federal Reserve also raises its rates, it could stimulate the outflow of capital and thus reduce the supply of dollars in the country,” Arias explained.

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