BondTrader wrote:
WiseAsh wrote:
Their is an anticipation, that when tapering starts in the USA, the dollar will appreciate in CR. The chain of events will be:
Interest rates rise in US
Dollars coming into CR will decrease as dollars will earn a higher return in the US
Creating a shortage of US currency in CR
Exchange rate of dollar to colones will increase
Coming to CR with your more valuable dollars, everything will cost you less
Possibly
Interest rates have already risen (almost doubled) and Dollar has done NOTHING essentially. Tapering is already discounted in the market and when it finally is begun, possibly October...possibly December...the reaction will be pretty muted and the process of tapering will be a very slow and gradual one. The big interest rate shock has already happened and, if anything, they may come back down. A Yellen appoinment is also likely to be US Dollar negative because she is so dovish. Probably of greater importance for the US Dollar will be the eventual outcome of upcoming budget negotiations...debt ceiling..government shutdown or not. If those don't go well, it could be a big NEGATIVE for the US Dollar. I have no clue about the outcome. The other ingredient needed for materially higher interest rates is a much more robust economy. That does not appear to be in the cards.
As I said before, economist here are predicting a better exchange rate for you guys.
http://www.nacion.com/economia/finanzas ... 61112.htmlTappering, is the root cause. Quotes from the artcle.......He added that influences the low capital inflows to the country, during the first days of 2014, compared to the previous three years.
"We believe that income (currency) will reduce volumes announced by the Federal Reserve (FED). One would expect that the strength of the appreciation of the exchange rate will be lower this year, "he said Madrigal.
The Fed decided to cut $ 10,000 million monthly injection of resources in the American economy, prompting an increase in long-term rates in the markets.
For Gerardo Corrales, CEO of BAC San José, the change in the monetary policy of the Fed and the recovery of the U.S. economy. UU. can push further devaluation of the colon.
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