Archive for April 8th, 2010

Two mysteries about foreign currency in Venezuela

April 8, 2010

Mystery Number One:

-Oil is up

-Cadivi gives less than it did last year

-Government seems to be intervening less in swap market

But international reserves fall US$ 7 billion in three months, US$ 5 billion transferred to Fonden, but US$ 2 billion is very real. International Reserves are at a 52 week low today.

Mystery Number Two:

-The Government said in January when the swap rate was near Bs. 6 per $ that it wanted to lower the swap rate to Bs. 4.3 per US$

-The Central Bank began selling US$ zero coupon bonds to “aid in lowering this swap rate. First sale was at a fixed price equivalent to Bs. 5.2 per dollar. Second to fifth sales at Bs. 4.8 per dollar. Sizes are small, few people get the bonds, swap prices soars hitting an all time high last week above Bs. 7 per US$.

-Today the Central Bank calls for an auction in which people can bid between 110 (Bs. 4.7) and 112 (Bs. 4.8)

What’s the idea? Essentially the Central Bank is giving away dollars, very cheap ones, for an unknown purpose, since these sales do not lower the swap rate.

Your guess is as good as mine…