Venezuela: Dicom rate depreciates following June devaluation
July 6, 2017
On 4 July, the bolivar traded in the parallel market at 7,691 VEF per USD. The result marked a steep 19.3% depreciation from the same day of last month. The parallel dollar shed 58.8% of its value since the start of the year and a massive 86.5% from the same day last year.
The bolivar traded in the parallel market is currently trading at record-low levels. The currency has experienced a sharp and almost uninterrupted depreciation since Q4 2016 due to a reduction in the Central Bank’s reserves requirement and an increase in monetary financing to PDVSA. The latest political developments at home partly explain the massive fluctuations in the currency in recent weeks.
Panelists participating in the LatinFocus Consensus Forecast see continued pressure on the parallel dollar and project a non-official exchange rate of 15,976 VEF per USD by the end of 2017. In 2018, the panel sees the non-official exchange rate trading at 36,322 VEF per USD.
The devaluation was part of government plans aimed at improving access to dollars in the economy. The new system envisages two weekly auctions instead of seven with a pre-established amount. The most recent devaluation, however, is not expected to have any meaningful impact since it doesn’t address the structural problems plaguing the Venezuelan FX market, especially related to currency controls. Analysts consider that the latest move will fail to improve liquidity and will therefore become another unsuccessful attempt to reform the convoluted exchange rate system.