January 15, 2010, 05:18 PM EST More From Businessweek Story Tools
By Daniel Cancel
Jan. 15 (Bloomberg) -- Venezuela’s bolivar fell the most in four days in the unregulated market after the central bank refrained from auctioning dollar bonds in the local market.
The central bank had issued $100 million of 90-day securities in the past two days. Venezuela began the auctions in a bid to hold down inflation after President Hugo Chavez devalued the official exchange rate by as much as 50 percent on Jan. 8 as he struggled with dollar outflows and a growing deficit.
The bolivar weakened 1.2 percent to 5.87 in unregulated trading from 5.8 yesterday, traders said. The currency has rallied 9 percent since Jan. 12, when the central bank said it will regularly sell dollar securities to meet demand in the local market.
“If the central bank continues to sell bonds to the local market, they’ll be able to control the parallel exchange rate,” Nelson Corrie, head trader at Interacciones Casa de Bolsa in Caracas said in a telephone interview.
Venezuelans turn to the parallel exchange market when they can’t get government authorization to buy dollars at the official rate.
Chavez devalued the 2.15-per dollar exchange rate, setting a level of 2.6 for imports of items including food and medicine and a rate of 4.3 for “non-essential” products.
‘Drag Down’
Chavez said the government will “drag down” the parallel rate by supplying dollars as part of a “permanent” monetary policy on Jan. 13. The government is targeting a parallel rate of 5 bolivars per dollar, said a central bank official who declined to be named because he’s not authorized to speak publicly.
The bank has auctioned 90-day zero-coupon dollar securities at 116.25 percent and payable in bolivars at 4.3 per dollar in the last two days. The implicit exchange rate of those securities is about 5 per dollar, traders said.
By allowing investors to pay for the dollar-denominated securities in bolivars, the government meets some of the demand for the U.S. currency.
Venezuela plans to register the securities, known as “bonos cambiarios,” in overseas markets, the central bank official said.
The yield on Venezuela’s 9.25 percent bonds due in 2027 rose for a fourth day, climbing 12 basis points to 12.12 percent at 4:41 p.m. in New York, according to JPMorgan Chase & Co. A basis point equals 0.01 percentage point. The bond’s price fell 0.75 cent on the dollar to 79.25 cents.
To contact the reporter on this story: Daniel Cancel in Caracas at +58-212-277-3712 or dcancel@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at +1-212-617-5105 or papadopoulos@bloomberg.net