The exchange rate of the Venezuelan bolivar, the country’s national fiat currency, fell 35.51% against the US dollar this week due to various factors, reaching 8.70 bolivars per US dollar. According to economists, this will cause prices to rise in the near future, with the exchange rate expected to reach up to 12 bolivars to the dollar by December.
The Venezuelan bolivar falls 35.51% against the dollar in one week
Many Latin American countries are affected by the strength the US dollar has shown this week. The Venezuelan bolivar, the country’s official currency, lost 35.51% of its value against the US dollar. The exchange rate reached 8.70 bolivars for one US dollar, an all-time high according to Monitor Dolar, a popular Twitter account that averages the cost of US currency across multiple exchanges. However, prices have reached over 9 bolivars per dollar on the popular Binance P2P exchange.
The official exchange rate reached 7.10 bolivars per US dollar, 1.60 bolivars less than the parallel value. Asdrubal Oliveros, director of the market research company Ecoanalitica, explained that there are two factors affecting the exchange rate: the first is related to the increase in public spending, which has put more bolivars in the hands of citizens and businesses who are incentivized to buy dollars to preserve their savings.
The other factor has to do with the intervention that the Central Bank of Venezuela executed, putting dollars up for sale through national banks. This intervention has been reduced this week, with sources reporting that less than 20% of what is commonly auctioned has been offered this week.
Effects, measures and predictions
For Oliveros, this will lead to a sharp rise in prices, which will affect inflation figures which had been somewhat under control until this month. Forecasts for the end of the year call for the exchange rate to continue rising if the central bank does not interfere with the same amount of funds to keep the market supplied with foreign currencies.
In this sense, Luis Arturo Barcenas, a Venezuelan economist, expects the exchange rate to climb between 10 and 12 bolivars per dollar by the end of the year. Barcelona said:
The money supply has doubled in 8 months, due to the pressures the government has received for the payment of salaries and bonuses.
Venezuela’s Central Bank will stage a new intervention this week to put $200 million in an auction on national banks in an attempt to stop the exchange rate rising. The bank will auction double what is normally traded each week.
The country had to execute a currency redenomination last year, removing six zeros from its currency to make it easier to pay and manage money.
What do you think of the recent devaluation of the Venezuelan bolivar? Tell us in the comments section below.
Image credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for informational purposes only. This is not a direct offer or the solicitation of an offer to buy or sell, or a recommendation or endorsement of any product, service or company. Bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.