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Bolivia: Another penny

Interestingly (well…depends how nerdy you are I suppose…for me it’s interesting) Bolivia today announced it was raising its forex against the US Dollar by another penny to 6.95, just ten days after doing exactly the same thing (and just after a new boss arrived at the Central Bank, Marcelo Zabalaga, on November 15th).
Or in other words, Bolivia keeps its crawling peg (i.e. semi fixed and cenbank controlled) at 6.97 to the dollar for two and a half years, then knocks it down by two separate notches just 10 days apart. Hmmmm…new trend is in town, methinks…..hmmmmmm. So I went to check on the evolution of the BOB/USD forex and this chart shows the story.

A couple of thoughts: Firstly, the rate has shown moments when it changes quite rapidly, so further central bank announcements wouldn’t come as a surprise. Secondly, the thinking behind this seems to be to control inflation, something that wasn’t a problem while the world deflated in late 2008 onwards but is showing signs of a comeback in Bolivia. Lastly, if, as is often said, a currency really is the acid test of a country’s economic health, it’s fun to note that Bolivia under its previous rulers was going to the dogs and  it was only when Evo came to power that it turned itself around.

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