Black Market Rate To Rally Further

The government's attempts to strengthen the parallel exchange rate of the bolivar appear to be working short-term, with the unit having firmed above the VEF*5.0000/US$ mark in recent days from around VEF*5.2500/US$ a week ago. A recent US$5bn Eurobond offering, which was heavily oversubscribed by dollar-starved locals, has helped strengthen liquidity. Next up is a US$3-5bn bond issue by the state-oil firm PdVSA, scheduled for the end of October, which is likely to spur additional appreciation in our view.

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