[NYTr] Venez Economy: Bolivar Falls

[All the News That Doesn't Fit]

Bloomberg - July 30, 2007
http://www.bloomberg.com/apps/news?pid=20601086&sid=aOs9iTc9bLCo

Venezuela Bolivar Falls on Concern Bond Sales Will Be Too Small

By Alex Kennedy

Venezuela's currency fell to a one- month low in unregulated trading on
speculation a government dollar-denominated bond sale to local banks
won't be large enough to meet demand for foreign currency.

Venezuela and Argentina plan to sell a dollar bond together by the end
of August, said Ricardo Sanguino, president of the Venezuelan
congressional finance commission, after markets closed July 27, without
revealing how much they would sell. Venezuela's Finance Minister
Rodrigo Cabezas said in May the countries planned to sell up to $1
billion of dollar and bolivar bonds to Venezuelan investors by the end
of the year.

``They're talking about $1 billion, with half dollar debt, half bolivar
debt,'' said Nelson Corrie, head of trading at Caracas-based
Interacciones Mercado de Capitales. ``That's just not enough to satisfy
dollar demand at this point.''

The bolivar dropped to 4,350 bolivars per U.S. dollar in the parallel
market, the lowest since June 21, from 4,300 on July 27, traders said.
The bolivar has fallen 22 percent this year in the unregulated market.

The Venezuelan government also plans to sell 200 billion bolivars ($93
million) of five-year domestic bonds on Aug. 1, the central bank said
today.

``That's just going to soak up a little bit of liquidity,'' Corrie
said. ``It's not going to strengthen the bolivar.''

Dollar-denominated bonds help reduce the money supply and meet demand
for foreign currency. State oil company Petroleos de Venezuela SA sold
$7.5 billion of dollar bonds earlier this year.

Official Exchange Rate

Venezuela pegs the bolivar at the official exchange rate of 2,150 under
restrictions imposed in February 2003. Venezuelans turn to unregulated
markets when they can't get approval from the government's Foreign
Exchange Administration Commission to buy dollars through the
government at the official exchange rate. The government also sets
minimum bank deposit rates and maximum lending rates.

The yield on state-owned Petroleos de Venezuela's 5.25 percent bond due
in April 2017 fell 4 basis points, or 0.04 percentage point, to 9.50
percent, according to composite prices from 10 local and international
banks. The bond's price, which moves inversely to yield, rose 0.217
cents to 73.467 cents on the dollar. 


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