Feb. 23 (AFP) -- Venezuela’s central bank may inject more than $5 billion of dollar-denominated securities into the financial system this year to strengthen the bolivar in the unregulated foreign-exchange market, a government official said.
The government is seeking to push the currency to 5 per dollar from 6.55 and maintain it at those levels through 2013 -- a weaker rate than the 4.3 target President Hugo Chavez gave last month, said the official, who declined to be identified because he’s not authorized to speak publicly.
Venezuela has limited scope to bolster the currency after foreign reserves fell below $31 billion for the first time since August, leaving them near the government-set “adequate level” of $28 billion.
Dollar-asset sales of about $5 billion will likely be too little to meet demand in the unregulated market from Venezuelan companies and individuals who can’t get government authorization to buy U.S. currency at the official rates, said Asdrubal Oliveros, a director at Caracas-based Ecoanalitica. He estimated $12 billion may be needed to spur a rebound in the currency.
“I think $5 billion to stabilize the parallel rate is insufficient,” Oliveros said in a phone interview.
Chavez devalued the official rate for the first time since 2005 on Jan. 8, creating a multi-tiered system where imports deemed essential receive a rate of 2.6 per dollar and non- essential items get 4.3. He said in a Jan. 15 speech that the parallel rate would be “dragged down” to 4.3, matching the weaker of the two official rates.
Bigger Auctions
The bolivar has slid 10.4 percent since that speech as government delays in selling dollars at the official rates spurred demand for the U.S. currency in the parallel market. The currency closed unchanged today at 6.55 per dollar after dropping 0.9 percent earlier, traders said.
Barclays Plc said in a report today that it expects the bolivar will trade within a range of 5.8 to 6.8 per dollar in the unregulated market this year.
The central bank has issued about $260 million of short- term dollar-denominated bonds in auctions this year in a bid to bolster the currency. The bank may increase the size of those auctions to as much as $100 million from a previous maximum amount of $50 million, the government official said in an interview in Caracas.
The government lets investors buy the dollar-based notes with bolivars, which allows them to circumvent the foreign- exchange regulations and obtain U.S. currency when they mature.
Bonds Fall
The government and state oil company Petroleos de Venezuela SA may issue as much as $6 billion in bonds this year after issuing $11.3 billion of debt last year, Barclays economist Alejandro Grisanti said in a report after traveling to Venezuela. The government official said that the country and PDVSA, as the oil company is known, will sell bonds in overseas markets this year. He declined to provide more details.
The yield on Venezuela’s 9.25 percent bonds maturing in 2027 rose 33 basis points, or 0.33 percentage point, to 13.15 percent at 5:15 p.m. in New York, according to JPMorgan Chase & Co. The bonds’ price dropped 1.78 cents on the dollar, the most since Feb. 4, to 73.5 cents.
The central bank, which has foreign reserves of $30.8 billion, is selling about $115 million on average a day at the government-set rates this month, the official said. The bank, which buys dollars from PDVSA, will seek this year to keep reserves above the “adequate level” of $28 billion, the official said.
Inflation
Those daily dollar sales may not be enough to meet demand from importers, which will hurt government efforts to contain inflation by pushing more companies into the unofficial market, Oliveros said.
Consumer prices rose 27 percent in Venezuela last year, the most among 78 economies tracked by Bloomberg. The bolivar fell to a record low on Aug. 4 of 7.05 per dollar in the unregulated market, pushing up prices of some imports.
Boris Segura, an economist at RBS Securities Inc. in Stamford, Connecticut, predicted inflation will end the year above 30 percent. He said the country’s year-long economic slump is crimping consumer demand, preventing a surge in inflation.
“Inflation is going to stay under upward pressure,” Segura said in a phone interview. “But on the other hand the recession is brutal and that’s going to keep a lid on inflation.”
Dollar-asset sales of about $5 billion will likely be too little to meet demand in the unregulated market from Venezuelan companies and individuals who can’t get government authorization to buy U.S. currency at the official rates, said Asdrubal Oliveros, a director at Caracas-based Ecoanalitica. He estimated $12 billion may be needed to spur a rebound in the currency.
“I think $5 billion to stabilize the parallel rate is insufficient,” Oliveros said in a phone interview.
Chavez devalued the official rate for the first time since 2005 on Jan. 8, creating a multi-tiered system where imports deemed essential receive a rate of 2.6 per dollar and non- essential items get 4.3. He said in a Jan. 15 speech that the parallel rate would be “dragged down” to 4.3, matching the weaker of the two official rates.
Bigger Auctions
The bolivar has slid 10.4 percent since that speech as government delays in selling dollars at the official rates spurred demand for the U.S. currency in the parallel market. The currency closed unchanged today at 6.55 per dollar after dropping 0.9 percent earlier, traders said.
Barclays Plc said in a report today that it expects the bolivar will trade within a range of 5.8 to 6.8 per dollar in the unregulated market this year.
The central bank has issued about $260 million of short- term dollar-denominated bonds in auctions this year in a bid to bolster the currency. The bank may increase the size of those auctions to as much as $100 million from a previous maximum amount of $50 million, the government official said in an interview in Caracas.
The government lets investors buy the dollar-based notes with bolivars, which allows them to circumvent the foreign- exchange regulations and obtain U.S. currency when they mature.
Bonds Fall
The government and state oil company Petroleos de Venezuela SA may issue as much as $6 billion in bonds this year after issuing $11.3 billion of debt last year, Barclays economist Alejandro Grisanti said in a report after traveling to Venezuela. The government official said that the country and PDVSA, as the oil company is known, will sell bonds in overseas markets this year. He declined to provide more details.
The yield on Venezuela’s 9.25 percent bonds maturing in 2027 rose 33 basis points, or 0.33 percentage point, to 13.15 percent at 5:15 p.m. in New York, according to JPMorgan Chase & Co. The bonds’ price dropped 1.78 cents on the dollar, the most since Feb. 4, to 73.5 cents.
The central bank, which has foreign reserves of $30.8 billion, is selling about $115 million on average a day at the government-set rates this month, the official said. The bank, which buys dollars from PDVSA, will seek this year to keep reserves above the “adequate level” of $28 billion, the official said.
Inflation
Those daily dollar sales may not be enough to meet demand from importers, which will hurt government efforts to contain inflation by pushing more companies into the unofficial market, Oliveros said.
Consumer prices rose 27 percent in Venezuela last year, the most among 78 economies tracked by Bloomberg. The bolivar fell to a record low on Aug. 4 of 7.05 per dollar in the unregulated market, pushing up prices of some imports.
Boris Segura, an economist at RBS Securities Inc. in Stamford, Connecticut, predicted inflation will end the year above 30 percent. He said the country’s year-long economic slump is crimping consumer demand, preventing a surge in inflation.
“Inflation is going to stay under upward pressure,” Segura said in a phone interview. “But on the other hand the recession is brutal and that’s going to keep a lid on inflation.”
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