Tuesday, February 23, 2010

This will not be enough...

...5 Billion in FX reserves can disappear in a day when the gnomes are active...

Feb. 23 (Bloomberg) -- Venezuela’s central bank may inject more than $5 billion of dollar-denominated securities into the financial system this year to strengthen the bolivar in the unregulated foreign-exchange market, a government official said.

The government is seeking to push the currency to 5 per dollar from 6.55 and maintain it at those levels through 2013 -- a weaker rate than the 4.3 target President Hugo Chavez gave last month, said the official, who declined to be identified because he’s not authorized to speak publicly.

Dollar-asset sales of about $5 billion will likely be too little to meet demand in the unregulated market from Venezuelan companies and individuals who can’t get government authorization to buy U.S. currency at the official rates, said Asdrubal Oliveros, a director at Caracas-based Ecoanalitica. He estimated $12 billion may be needed to spur a rebound in the currency.

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