Costa Rica's Exchange Rate Hits Lowest Value in 11 Years
The dollar closed at ¢501.03, marking the lowest exchange rate since December 2013.
The exchange rate in Costa Rica reached ¢501.03 on Wednesday, marking the lowest value recorded in eleven years.
The previous low was observed on December 16, 2013, when the currency closed at ¢500.55, according to data from the Central Bank of Costa Rica (BCCR).
On Wednesday, the dollar's value dipped to a minimum of ¢500, while it had been recorded at ¢499.25 the previous day.
This week, the dollar's price has decreased by ¢4.11 compared to the previous Friday's closing at ¢505.44. The currency has been on a downward trend since Monday, when it was at ¢503.36 and closed at ¢501.39 on Tuesday.
Luis Vargas, an economist and researcher at the University of Costa Rica, indicated that this behavior is linked to the dynamism of exports which creates a greater supply of currencies, thus putting pressure on the appreciation of the exchange rate.
On this Wednesday alone, $38.8 million was traded across 218 transactions, the lowest amount for the week, in contrast to the $50.4 million on Monday and $42.3 million on Tuesday.
According to BCCR records, on Tuesday, the bank sold $117.2 million to the non-banking public sector, representing the highest single-day amount registered this year.
Vargas estimated that it is possible a public non-financial institution demanded that amount to meet certain obligations.
However, outside of this date, demand has shown a marginal trend in the foreign exchange market, contributing to the appreciation of the exchange rate.
Vidal Villalobos, an economic advisor at Grupo Prival, noted that the behavior of the exchange rate relates to the payment of the value-added tax (VAT), the settlement of income tax, and the disbursement of biweekly salaries, as companies exchange currencies (from dollars to colones) to meet these obligations.
On February 28, the International Monetary Fund (IMF) recommended allowing more flexibility in the exchange rate to adapt to market conditions, indicating that a larger accumulation of international reserves by the BCCR is unwarranted.
Despite this observation, foreign currency purchases made by the Central Bank, either for the public sector or to raise reserves, have prevented the dollar's price from declining further.
The IMF criticized the Central Bank's ongoing participation in the exchange market as it may weaken the transmission of monetary policy and hinder the development of the foreign exchange market.
Meanwhile, the Organisation for Economic Co-operation and Development (OECD) urged the BCCR to preserve the exchange rate's flexibility and limit interventions in the exchange market solely to prevent abrupt price changes, as referenced in the document "OECD Economic Surveys: Costa Rica 2025," presented on Tuesday by Mathias Cormann, the organization's secretary-general.
The previous low was observed on December 16, 2013, when the currency closed at ¢500.55, according to data from the Central Bank of Costa Rica (BCCR).
On Wednesday, the dollar's value dipped to a minimum of ¢500, while it had been recorded at ¢499.25 the previous day.
This week, the dollar's price has decreased by ¢4.11 compared to the previous Friday's closing at ¢505.44. The currency has been on a downward trend since Monday, when it was at ¢503.36 and closed at ¢501.39 on Tuesday.
Luis Vargas, an economist and researcher at the University of Costa Rica, indicated that this behavior is linked to the dynamism of exports which creates a greater supply of currencies, thus putting pressure on the appreciation of the exchange rate.
On this Wednesday alone, $38.8 million was traded across 218 transactions, the lowest amount for the week, in contrast to the $50.4 million on Monday and $42.3 million on Tuesday.
According to BCCR records, on Tuesday, the bank sold $117.2 million to the non-banking public sector, representing the highest single-day amount registered this year.
Vargas estimated that it is possible a public non-financial institution demanded that amount to meet certain obligations.
However, outside of this date, demand has shown a marginal trend in the foreign exchange market, contributing to the appreciation of the exchange rate.
Vidal Villalobos, an economic advisor at Grupo Prival, noted that the behavior of the exchange rate relates to the payment of the value-added tax (VAT), the settlement of income tax, and the disbursement of biweekly salaries, as companies exchange currencies (from dollars to colones) to meet these obligations.
On February 28, the International Monetary Fund (IMF) recommended allowing more flexibility in the exchange rate to adapt to market conditions, indicating that a larger accumulation of international reserves by the BCCR is unwarranted.
Despite this observation, foreign currency purchases made by the Central Bank, either for the public sector or to raise reserves, have prevented the dollar's price from declining further.
The IMF criticized the Central Bank's ongoing participation in the exchange market as it may weaken the transmission of monetary policy and hinder the development of the foreign exchange market.
Meanwhile, the Organisation for Economic Co-operation and Development (OECD) urged the BCCR to preserve the exchange rate's flexibility and limit interventions in the exchange market solely to prevent abrupt price changes, as referenced in the document "OECD Economic Surveys: Costa Rica 2025," presented on Tuesday by Mathias Cormann, the organization's secretary-general.
