Costa Rica News – (Bloomberg) — Costa Rica’s currency dropped the most in nine months after the central bank said it would let the colon float more freely against the dollar.
The colon fell 0.7 percent on Monday to 539.55 per dollar, its sharpest decline since May, according to data compiled by Bloomberg. The currency has tumbled 5.3 percent against the greenback in the past 12 months.
Central Bank President Olivier Castro said Saturday the country will let its currency to float against the dollar, intervening when the colon experiences “abnormal fluctuations.” That policy ended a currency band put in place in October 2006 following 22 years of small devaluations. The band limited the colon to a range of 500 to 866 per dollar.
Costa Rica’s business and banking associations welcomed the change in a statement Monday while local traders said they don’t expect large swings under the new system.
“We expect the exchange rate to maintain low volatility,” said Hernan Varela, the chief strategist for local brokerage firm Aldesa, adding that the central bank will intervene to “avoid movements that it considers violent.”
Costa Rica had about $7.2 billion in international reserves as of the end of January and announced a plan Saturday to buy as much as $800 million through 2016.
by Michael D McDonald, http://www.bloomberg.com/