The Dominican Republic’s currency dipped below the 8 September rate of RD$30.64 and a US dollar was being bought for less than RD$30 for the first time over the weekend. According to Freddy Ortiz, the president of the Association of Remittance Companies, the flow of foreign currency has surpassed the economy’s capacity to purchase dollars given the economic recession and scarcity of pesos in circulation.
Ortiz expects the peso to continue to appreciate in relation to the US dollar. Ortiz said that the announced arrangement that will allow Venezuelan oil purchases to be financed, in addition to the fact that merchandise for the Christmas sales have already entered the country, will prompt a lesser demand for dollars.
Arturo Peguero, president of the Association of Free Zones, said that the lower exchange rate could create unemployment, but that he expects this to be a temporary situation only. He said that for free zones to compete they need a rate of RD$35-RD$40 to the US dollar. When the exchange drops below 35, only certain companies are competitive. The rate had climbed to RD$55 earlier this year, but collapsed upon the government handover in August.
El Caribe says that among the factors that have contributed to the peso’s upward climb is the return of capitals from abroad and increased confidence in the local economy, which has enabled the Central Bank to increase its international reserves that as of 1 November represented US$460 million.
The Central Bankl has maintained a policy of monetary restriction, and has issued a decline of 60% to 31% in its interest rates.