Hoy newspaper reports that the peso fell to RD$56-US$1 yesterday, with expectations for continued depreciation. While banks were buying dollars at RD$53, there were few that were selling. The newspaper mentions as factors contributing to the depreciation the political turmoil, the uncertainties regarding the resumption of the IMF agreement and the government’s arrears in fulfilling interest payments due on sovereign bonds. Other pressures can be found in the government sourcing US dollars on the market to make payments on the debt to power generation companies.
Hoy also reports on the increased amount of money in circulation that has spurred the run on the dollar. The newspaper cites sources at the Central Bank that indicate that since December 2002, the government has financed collapsed bank operations to the tune of RD$96.4 billion. This has caused money in circulation to rise from RD$42 billion in December 2002 to RD$81.6 billion in January 2004. Likewise, domestic financing has shot from RD$7.1 billion in December 2002 to RD$109.2 billion in January 2004, according to Central Bank figures.
PLD economist Vicente Bengoa, as reported in Hoy today, believes the peso will not appreciate in the near future. He says that the government has been sourcing the market to make its US$27-million interest payment on the US$600-million sovereign bonds that was due 23 January. Shortly after, he said, they will have to come up with another US$23.75 million to make a payment on 27 March of the interest due on the placement of the first US$500 million in sovereign bonds.