The Bank of Guatemala (Banguat) detailed this Wednesday, October 12, that the behavior of the exchange rate during September and October is associated with seasonal factors, such as the increase in the demand for foreign currency for imports associated with the year-end holidays.
The Banguat also assures that from October to December there has been an “appreciation trend, due to the fact that the demand for foreign currency for imports has already been satisfied and income from exports increases” and for this reason they expect the exchange rate to return to previous levels.
A Banguat statement states that “the nominal exchange rate in Guatemala is free, that is, it is determined by the supply and demand of foreign currency in the market, characterized by low volatility that reflects the public’s confidence in the national currency. Indeed, the volatility of the exchange rate in Guatemala is the lowest in Latin America, reflecting the macroeconomic strength of the country”.
It adds that “the reference exchange rate went from Q7.74080 per US$1.00 on September 1, 2022 to Q7.91233 per US$1.00 on October 5, 2022, later decreasing to Q7.87570 per US$1.00 on October 12 from 2022, which means a depreciation of only 1.7% in said period”.
The document adds that “The behavior of the exchange rate is largely associated with seasonal factors. In effect, seasonality indicates that in September of each year the nominal exchange rate reaches its highest level, due to an increase in the demand for foreign currency for imports associated with the end-of-the-year holidays, and a lower income of foreign currency from exports”.
“In the months of October to December, an appreciation trend begins to be observed, because the demand for foreign currency for imports has already been satisfied and income from exports increases, in addition, foreign currency income from family remittances tends to increase in the last part of the year, therefore, the exchange rate is expected to return to previous levels”, the document refers.
It adds that the Banguat, “using the participation mechanisms provided for in the exchange policy, sold foreign currency in the market from the beginning of September until October 4, 2022, while between October 5 and 6 it no longer had to sell, given that the demand for foreign exchange began to ease, as anticipated; even, already on October 7, market participants had foreign currency surpluses, so the Banco de Guatemala participated by buying in the foreign exchange market”.
“As of this last date, depreciation pressures are no longer observed in the market, in line with the seasonality of the exchange rate. Taking into account the foregoing, the Banco de Guatemala reiterates its commitment to ensure the stability of the nominal exchange rate, for which will use all the mechanisms provided for in the current exchange policy”, concludes the document.
