Venezuelan Currency Falls Following Chavez Statements

The Associated Press Published: Sep 5, 2001

CARACAS, Venezuela (AP) - The Venezuelan bolivar took a dip Wednesday in a session of active trading after President Hugo Chavez suggested he might declare a state of emergency to stem demand for dollars. The bolivar ended at a midrate of 741.25 to the dollar compared to Tuesday's 738.50 close, according to the Central Bank.

Dollar "demand was high due to the statements made by the president," one currency trader said.

Late Tuesday, Chavez said he has the option of declaring a "state of emergency" to implement measures aimed at defending the bolivar. The left-leaning president often lambasts "speculators" who buy dollars and take them abroad.

In May, capital flight surged after Chavez threatened to declare a state of emergency to combat corruption and crime, prompting speculation that he would impose foreign-exchange controls.

The Central Bank controls the bolivar's devaluation within a plus or minus 7.5 percent band, whose central parity is set to depreciate 7 percent this year.

Chavez has said he will not devalue the bolivar, which many economists say is overvalued by anywhere from 20 percent to 80 percent.

A Central Bank director recently vowed the institution would deplete its dollar reserve before the resorting to devaluation, a statement most economists dismissed as rhetoric.

http://ap.tbo.com/ap/breaking/MGACD1BN9RC.html

-- Martin Thompson (mthom1927@aol.com), September 05, 2001