Venezuelan President Nicolas Maduro on Thursday ordered a redenomination of the ailing bolivar currency, knocking three zeros off amid hyperinflation and a crippling economic crisis.
The measure to divide the so-called bolivar fuerte — or “strong bolivar” — currency by 1,000 would take effect from June 4, Maduro said, adding that it would not have any impact on the bolivar’s value.
The move illustrates the collapse of the bolivar, which has fallen 99.99 percent against the US dollar on the black market since Maduro came to power in April 2013. A US$100 purchase of bolivars then would now be worth just US$0.01.
However, Maduro, 55, presented the move as a positive development intended to protect Venezuela against currency speculators and a US-led “economic war” against the OPEC member.
Critics said that the currency measure was no panacea for Venezuela’s economic mess and just a psychological ploy to make Venezuelans forget the extent of the hyperinflation.
While the move sounds like a currency revaluation, economists consider it a currency redenomination, as the country is not changing the value of its official exchange rate.
Venezuelans will not need to turn in the currency now in their wallets, but all new currency printed or minted is to be in the new denominations.
Millions of Venezuelans are suffering from shortages of food and medicines during a fifth year of recession that critics blame on government incompetence and corruption, but which Maduro has said is due to Western hostility against him and the fall of oil prices.
“Venezuela has been victim of a brutal, economic war,” said Maduro, whose government has been the target of US, EU and Canadian sanctions over allegations of political and rights abuses.
Maduro made the announcement during an event shown live on TV, flanked by aides and bankers, to discuss Venezuela’s new cryptocurrency, the petro.
Venezuela’s government similarly redenominated its currency by knocking off three zeros a decade ago.
Prices in Venezuela rose 6,147 percent in the 12 months through last month, according to estimates by the country’s opposition-led National Assembly, which are broadly in line with independent economists’ figures.
Maduro is running for re-election on May 20 in a vote critics have said would be rigged to extend the president’s rule.
The opposition coalition is boycotting the vote, although Progressive Advance party presidential candidate Henri Falcon has broken ranks to run against Maduro.
Falcon has promised to dollarize Venezuela’s economy as a way to beat hyperinflation and regain investor confidence.
“Amid the biggest economic collapse in the history of Latin America, the government of Nicolas Maduro attempts to hide hyperinflation by knocking zeros off the currency,” said Francisco Rodriguez, a Venezuelan economist and Wall Street analyst working as Falcon’s chief economic adviser.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS