Chavez said yesterday the government would stop selling dollars at the official rate of 2,150 bolivars to importers of luxury items such as expensive cars and alcohol. He pledged to ``tighten the screws'' on exchange controls.
``This market depends on confidence, and right now, there's no confidence,'' said Pablo Puentes, a trader with the Caracas brokerage Interbursa Casa de Bolsa CA.
The bolivar dropped 2 percent to 5,100 bolivars per U.S. dollar in unregulated currency exchange, from 5,000 on Sept. 28, traders said. Venezuela's currency has fallen 33 percent this year.
Venezuela pegs the bolivar at the official exchange rate 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 at the official exchange rate.
The bolivar also weakened on speculation a government sale of dollar bonds was too small to meet demand for foreign currency.
The government sold local investors $600 million of dollar bonds that it bought from Argentina, which can be resold abroad, and $600 million of its own dollar-linked debt in a joint sale last week.
Bond Pricing
The government plans to announce the price of the sale and a ``better and more democratic'' distribution of the bonds tomorrow, Finance Minister Rodrigo Cabezas said today. The ministry initially said last month that the results of the sale would be announced today.
``We understand the demand for the bond was at least three times what was offered,'' said Nelson Corrie, head trader at Caracas-based brokerage Interacciones Mercado de Capitales. ``That means a lot of banks and investors seeking dollars will only get a very small part of the bond.''
The yield on Venezuela's 9.25 percent dollar bond maturing in 2027 fell 14 basis points, or 0.14 percentage point, to 8.74 percent at 12:27 p.m. New York time, according the JPMorgan Chase & Co. The price, which moves inversely to the yield, rose 1.3 cents on the dollar to 104.80 cents.