Economy February 21, 2023 | 12:00 pm

Peso appreciation trend returns

The exchange market resumed the path of appreciation of the Dominican peso, a trend that during 2022 represented a revaluation of the national currency against the US dollar. According to information from the exchange market, last week there were wholesale operations with rates below RD$56.00 per dollar, both for purchase and sale. During 11 months last year, there was a marked trend towards the base of the exchange rate in the foreign exchange market, which was not greater because the Central Bank intervened by buying dollars to avoid further falls that could affect the profitability of the generating sectors. Until the end of November, the dollar was trading in a range of RD$55.00 to RD$56.00 per dollar. After the first fortnight of December, there was a slight slide in the rate and it was placed over RD$56.00. This increase was attributed to demands by importers to cover debts with their foreign suppliers of raw materials and final goods purchased for Christmas and before Black Friday.

In general, the revaluation of the Dominican currency against the United States was 2.0% during the past year 2022, according to calculations made by the Central Bank of the Dominican Republic. Already in the first month and a half of this year, the appreciation is around 1.13%. After the slide of the last five weeks of 2022, the exchange market has once again reflected falls in the dollar exchange rate. The inflow of foreign currency continues to boom. Last January the inflow of remittances was US$802 million, a figure slightly higher than that registered in the same month of the previous year. According to official calculations, so far this year, the Dominican peso has appreciated 1.69% against the US dollar. This behavior is due to the greater availability of foreign currency in the local market as a result of the increase in the flows of remittances received during the month of January, equivalent to a 5.6% (US$42.7 million) increase compared to 2022.

The increase in the flow of foreign currencies is also associated with more favorable financial conditions that have generated incentives for local and international institutional investors to allocate their capital in instruments denominated in local currency. An expert in the matter commented that in particular, this behavior is evident in the wholesale market segment, whose prices have experienced a decrease in the currency of up to 63 cents of Dominican pesos since the beginning of the current year, generating an accumulated appreciation of 1.13% in 2023. In its most recent monetary policy report, the BCRD, when referring to aspects of the external sector of the economy, said that “activities that generate foreign currency (tourism, national exports, and free zones, remittances and foreign direct investment) have maintained a performance positive, contributing to an appreciation of the Dominican peso of around 2.0% in 2022”.

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