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fpapia

Exchange Rate Going Up Every Day... Why?

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The problem with your conspiracy theory, fpapia, is that the Dollar was being artificially held up for nearly 2 years at 500 colones. Thus the Central Bank of Costa Rica was soaking up Dollars by selling Colones to help prop up the Dollar/Colone rate. If you short the Dollar or go long the Colone six months ago and still hold your position, you thus lost 12 percent, let alone what leverage you applied.

It seems obvious to me that investors are fleeing the Colone and buying Dollars or no new Colone investors are coming in with Dollars, same thing. Thus the flood of Colones on the market. But the Central Bank of CR can help alleviate that huge move or hold it back by buying back those Colone with the Dollars they took in over the past 2 years, making a profit while at it.

I don't see the conspiracy, I just see complacency by the CR central bank who want a stronger Dollar and have said so all along. Of course an orderly movement is in their interest, thus I think they are in the market as we speak, in an attempt to keep the rate change from getting out of hand.

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The fact is that the BCCR has used more dollars for buying Colones than they have budgeted for - Guess what happens when they run out of dollars? Venezuela time!

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LOL, where you getting your information? As recently as Jan. 31st., they still had 7.2 billion in foreign currency reserves. Which I am sure they are using today for Colone purchases. Hardly a Venezuela.

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David, I don't think elviscaprice was " promote a totally unsubstantiated conspiracy theory", his comments make sense. I think it was newmans comment that doesn't .

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BCCR is using their dollars to buy colones, to keep the price of the colone from collapsing (which brings on inflation) - right now, every one is selling their colones for dollars - It is true that at the bottom of the Exchange band, BCCR is buying dollars, to support the dollar, but the flooding of the market with colones using this approach has and is destroying the value of the colone because the market is being flooded with colones, driving up inflation! Venezuela has suspended trading in dollars, as they need every dollar they have in order to service their foreign debt (in dollars)! So, when a person in Venezuela wants to buy an airline ticket, the airline won't accept Venezuelan currency, because they can't Exchange it for dollars - and this follows through for all companies that buy on the foreign market when dealing in dollars - they can't buy products to put on their shelves (toilet paper, newsprint, etc.) - anything that trades in dollars!!

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Dana, you wrote, "David, I don't think elviscaprice was " promote a totally unsubstantiated conspiracy theory", his comments make sense. I think it was newmans comment that doesn't ."

 

. . . and that was my point.

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What was interesting last week while in CR was what I paid where ... I got great deals at the dentist (10% off $36 cleaning priced in colones), on taxis and at lunch and dinner at local restaurants (paid in colones gave me a 10% better deal at 550 vs 500) but I had to pay in dollars at the B&B and in dollars for the exit tax at the airport. I guess the secret at a time like now is to negotiate all your expenses in colones.

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I'm a CD in colones guy, so this has my attention.

 

thinking to buy more colones ... In a couple of months if we stabilize a bit

 

In the mean time, look at a 10 yr chart, not the 1st time we have been here.

 

Our banker said max 560 then work it's way back to 500 ... Sounds like good rumor

 

In the US we use USD, in CR we use colones

 

Our 1st CR election, very interesting, but don't think it plays a part.

 

The best to all, Dave and Jessica, Jaco

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Unrelated. There are issues with the current coffee crop in Brazil, the largest grower of Arabica beans in the world. This is causing coffee prices worldwide to rise.

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Newman, I have come to conclude you know just enough to say something, but not a clue as to how it all works together. Currencies are a very complex derivative that are influenced by numerous factors, some more so than others in different combinations.

Costa Rica and Venezuela have far different situations that influence their respective currencies. To compare the 2 is like comparing the Moon to Jupiter.

Did you see the big reversal today on the bid for Dollar/Colone? Who do you think is responsible for that move? I'll give you one guess and it's not Venezuela. LOL

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Looks like I got toasted and branded as a conspiracy theorist. I’m not a trader now nor never have been. So, it is possible that I got the shorts and longs reversed. Anyway just remember that because one is not paranoid doesn’t mean that they are not out to get you.

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