Venezuela to Resume Dollar Sales to Stabilize Bolivar

Venezuela Resumes Dollar Sales to Support Currency

Venezuela is reportedly preparing to resume US dollar sales to stabilize its national currency, the bolivar, following disruptions from a US oil blockade. According to reports, banks in Caracas have started offering dollars to corporate clients, marking the first significant government supply since mid-December.

Situational Overview

The move comes after the bolivar experienced significant volatility due to the blockade on oil exports, which restricted the government's primary source of foreign currency. At its peak, the currency weakened over 20% to approximately 800 per dollar. Following news of the intervention and a US authorization for some traders to sell Venezuelan oil, the bolivar has since stabilized in parallel trading below 500 per dollar.

Impact on the Economy

The injection of dollars into the market is a direct attempt to curb hyperinflation and restore confidence in the bolivar. By increasing the supply of foreign currency, the government aims to reduce pressure on the parallel exchange rate, which heavily influences domestic prices. The success of this measure will depend on the consistency and volume of the funds made available.

Summary

Market participants will closely monitor the volume and regularity of the dollar sales. The bolivar's performance in the coming weeks will serve as a key indicator of the policy's initial effectiveness in stabilizing the nation's economy.

FAQ

Q: Why is Venezuela resuming dollar sales?
A: To stabilize its currency, the bolivar, which has been highly volatile due to a US oil blockade cutting off foreign currency revenue.

Q: What was the recent impact on the bolivar?
A: The currency weakened significantly, at one point falling over 20% to 800 per dollar, before stabilizing below 500 per dollar following the news.

Source: Investing.com