Wednesday, March 18, 2009

Banguat Sells Dollars to Stabilize the Quetzal

The Bank of Guatemala made it's first move in the currency market this year by selling U.S. $19 million, seeking to prevent further depreciation of the quetzal.

Julio Suarez, vice president of Banguat commented that the central bank made it's own decision on this action and none of the automatic intervention mechanisms were activated. Suarez explained that the intention is to temper expectations.

This is the first occasion on which Banguat used its discretionary power to intervene in the exchange rate, a measure adopted last February 25th.

Yesterday, banks sold dollars to the system above Q8.20, while the reference benchmark was Q8.07.

Jorge Briz, president of the Chamber of Commerce in Guatemala, an entity that has questioned Banguat's previous reluctance to intervene, said that "it might be too late for the central bank to stabilize the exchange rate."

Tulio García, of the Guatemalan Association of Exporters of Guatemala, said that Banguat must be careful in the statements and not set a precedent for intervention and not say it will do something and then not follow through.

Banguat buys or sells dollars to prevent abrupt changes in the exchange rate but the world crisis has caused fluctuations in the currencies of various countries.

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