Colón to Gain Value Against Dollar

November 23, 2007

The Central Bank made a surprise move Wednesday night of dropping the floor of its “crawling band” exchange-rate system by 4%, or 20 colones.

Technically, that means the colón’s value against the dollar has a wider space to fluctuate in the Costa Rican market without the Central Bank intervening to influence it by buying or selling dollars.

Practically, however, it means the value of the colón will likely go up against the dollar, as the colón has been pushing against the floor of the band for some time, and a drop in that floor means the colón is likely to follow.

Central Bank president Francisco de Paula Gutiérrez said he expected exchange rates to vary – possibly widely – from bank to bank while the market adjusts to the change.

As of press time, Banco Nacional was buying dollars at 495 and selling them at 500, while private bank BAC San José was buying dollars at 497.37 and selling them at 512.

 

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