Exchange Rate in Dominican Republic
Dominican Republic - Exchange Rate
Peso sinks amid weaker external sector and rising uncertainty
The Dominican peso has fallen markedly against the USD in recent weeks, and on 12 June traded at 58.0 per USD, down 5.3% month-on-month and 8.7% year-to-date.
The Covid-19 pandemic is the key factor behind the depreciation. The virus has led to a collapse in tourism, and depressed exports and remittances, all three of which are key sources of foreign currency. Moreover, in response to the pandemic the Central Bank has markedly loosened its monetary stance through rate cuts and extra liquidity, further weighing on the peso. In addition, concerns over the health of the domestic economy and rising uncertainty have boosted the demand for dollars.
In an effort to support the currency, the Central Bank secured roughly USD 650 million in assistance from the IMF and has intervened in the currency market. The Bank also issued a public appeal for calm in late May, urging businesses and citizens to avoid the panic-buying of dollars.
The currency depreciation poses a risk to public debt sustainability, given the sizeable share of foreign currency denominated government debt (roughly half of total government debt according to the IMF). Moreover, the weaker peso is limiting the ability of the Central Bank to lower rates in order to support the economy, and is weighing on FX reserves—which were down USD 2.4 billion from January to May.
Our panelists currently see the peso regaining some ground as the external sector gradually recovers, although the outlook is uncertain, and hinges on the evolution of the pandemic at home and abroad. Our panelists see the DOP ending 2020 at 55.9 per USD and 2021 at 57.8 per USD.
Dominican Republic - Exchange Rate Data
| 2015 | 2016 | 2017 | 2018 | 2019 | |
|---|---|---|---|---|---|
| Exchange Rate (vs USD) | 45.53 | 46.34 | 47.80 | 50.27 | 52.96 |
Dominican Republic Exchange Rate Chart
Source: Dominican Republic Central Bank and FocusEconomics calculations
Dominican Republic Facts
| Value | Change | Date | |
|---|---|---|---|
| Exchange Rate | 52.96 | 0.80 % | Jan 01 |
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Economic activity increased 6.4% in year-on-year terms in March, which was above February's 5.8% increase.
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At its 29 April meeting, the Central Bank of the Dominican Republic (BCRD) decided to leave its policy rate at 5.50%, in line with analysts’ expectations. The decision came despite inflation and inflation expectations continuing to soar further above the BCRD’s target in March and April respectively, with recent events in the global economy—notably the war in Ukraine and Covid-19 lockdowns in China—stoking price pressures.
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Consumer prices rose 0.67% from the previous month in March, coming in below the 0.92% rise recorded in February.
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Economic activity expanded 5.8% in year-on-year terms in February, which followed January's 6.3% increase.
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Dominican Republic: Central Bank delivers 50 basis point hike in March
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At its end-March meeting, the Central Bank of the Dominican Republic (BCRD) decided to increase its policy rate by 50 basis points to 5.50%. The decision came as a surprise to some analysts, who had expected a smaller rate hike.
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