October 3, 2007

Crack in the Venezuelan currency

The U.S. dollar in Venezuela's unofficial market for foreign currency jumped to a historic high Wednesday, the morning after the government opted not to allocate any dollar-denominated bonds to corporate customers. U.S. currency in the Andean country's black market now trades between 5,340 bolivars per dollar and VEB5,440, more than twice the official rate of VEB2,150, according to the latest figures by Veneconomia, a local business publication. Observers expect the dollar to trade even higher in coming days.

The decision has prompted companies that sought scarce foreign exchange through debt purchases to seek funding in the parallel market instead, pushing up the price of greenback. Chavez insists he will keep exchange restrictions in place indefinitely.

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