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What is the reason for the slight increase in the price of the dollar in recent weeks against the quetzal?

On August 1, the reference exchange rate by the Bank of Guatemala (Banguat) was quoted at Q7.72 and yesterday the official quote was Q7.82, for which a period of 53 days increased ten cents, and the authorities called on the economic agents not to be alarmed, since it is normal behavior.

In the banks of the system, the currency either for purchase or sale fluctuates between Q0.20 to Q0.30 as a margin, and for sale it was quoted up to Q7.95 in agency and for purchase in Q7.65, as an average. observed yesterday.

Statistics indicate that from January to August the average exchange rate was Q7.68 per US$1 per purchase and Q7.72 for sale, while during 2021 it was Q7.71 for purchase and Q7.75 for sale.

What explains it?

Alfredo Blanco Valdés, vice president of Banguat and the Monetary Board (JM), announced at a press conference some elements that have been observed in the foreign exchange market, but stressed that “the behavior of the exchange rate continues to maintain stability.”

He explained that in the report of Q7.81 per US$1 (Wednesday, September 21), it is due to the seasonal behavior of the variable; there is nothing abnormal, and it is typical in these months of the year in which it appears in all the previous years.

“We know that in this period the demand for foreign currency for imports at the end of the year increases, and companies look for dollars to be able to make purchases,” he said at the conference.

In addition, another variable was detected, since in the international context there is a decrease in maritime transport rates, especially in the cost of container freight (on routes to China), which are down, and although with a certain delay, it is transferred to the Guatemalan market, a situation that is being exploited and coincides with this increase in imports of Christmas goods.

The central bank official assured that this behavior “occurs precisely at the end of July until October, so that it is nothing abnormal and that the economic agents are calm.”

In any case, he emphasized that the trend is being observed, if you have participated in the institutional foreign exchange market to avoid volatility, and “that high volatility is not convenient, in that sense in recent days we have gone out to sell around US$342 million, which is what all the years to maintain exchange rate stability.

Blanco Valdés reiterated that there is no reason for economic agents to form expectations of a rise or fall in the exchange rate and that is why the central bank is there to guarantee its stability at all times.

cyclic behavior

For Paul Boteo, executive director of the Fundación Libertad y Desarrollo, there are two reasons that explain the trend in the exchange rate in recent weeks: The first is due to a cyclical behavior, associated above all with year-end purchases, in which companies stock up on seasonal products; and the second due to the increase in prices that are taking in imported products that generates greater pressure in the purchase of dollarsand that’s what we’re looking at.

The analyst is not of the idea that there is still an outflow of capital, it is not that effect, but that in the near future some type of slowdown in remittances could be observed, and that it could be surprising in the next monthly data, but that In general, the dollar is at its maximum peak now, because all currencies are depreciating against the dollar, and it would be strange if we did not join that wave.

As of September 15, the income of foreign currency from family remittances was US$12,502 million and a growth rate of 20.7%, and by the end of the year, income of US$17,590 million is estimated with double-digit growth with compared to 2021 (US$15,295 million), which would be a historical figure and for 2023 it is estimated US$18,645 million.

Interventions

The Banguat intervenes in the market to smooth out exchange rate fluctuations through a participation rule.

The purpose of participation is to moderate the volatility (upward or downward) of the nominal exchange rate, without affecting the trend.

As of September 20, the Banguat has come out to participate in purchases for US$1,694 million and for sales US$743 million, which add up to US$2,437 million.

In 2021 the total amount was US$2,202.9 million and in 2020 US$5,511 million in purchases and sales of US$84 million and US$389 million, respectively.

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