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Venezuela Bolivar gains as PDVSA bond sale reduces money supply
By Alex Kennedy
Bloomberg
CARACAS
Petroleumworld.com 04 10 07
Venezuela's bolivar rose in unregulated markets as a $7.5 billion sale of dollar-denominated bonds by state oil company Petroleos de Venezuela SA drained cash from the economy and helped meet investor demand for the U.S. currency.The bolivar gained 0.8 percent to 3,550 per dollar in the parallel market at 11:40 a.m. New York time, traders said. It's near its strongest since Jan. 5 and has gained 10 percent since March 22, when the government announced the PDVSA bond sale. The government keeps the bolivar pegged at an official rate of 2,150 per dollar.
The bond sale forms part of a government plan to help the central bank slow money supply growth and lower the highest inflation rate in Latin America.
``The PDVSA bond sale helped lower liquidity temporarily,'' said Henry Travieso, a trader with Caracas-based Global Capital Valores.
Travieso said that cash levels will probably rise again soon, capping the bolivar's gains, as rising government spending pumps money into the economy. He predicts the bolivar will gain to about 3,300 per dollar in the black market before starting to weaken.
The PDVSA bonds formally start trading after their April 12 settlement. The issue is the largest ever domestic corporate bond sale in Latin America.
Under restrictions that President Hugo Chavez imposed in February 2003, foreign currency trading outside official government channels is prohibited.
Venezuelans often resort to the unregulated market to obtain dollars when they can't get them from the government at the official rate. In a bid to curb the use of the parallel dollar market, Finance Ministry and tax agency officials said in January that people who buy and sell dollars outside government channels may be subject to prosecution.
To contact the reporter on this story: Alex Kennedy in Caracas at Akennedy1@bloomberg.net
Bloomberg 04 09 07
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