Objective and Goal
The objective of exchange rate policy, in congruence with monetary policy, is to ensure the maintenance of the internal and external value of the national currency and; consequently, stimulate the competitiveness of Honduran exports, especially in relation to those of its main trading partners, seeking a sustainable deficit of the current account in the medium term.
For this purpose and within the framework of the Monetary Program, the Central Bank of Honduras (BCH, by its initials in Spanish), seeks to maintain Net International Reserves at level that allows adequate coverage in months of imports within international standards.
Strategy
The BCH executes its exchange policy in such a way that allows it to deal with the conjuncture impact of the risks of external shocks, especially those related to the evolution of oil and food prices, as well as changes in currency prices of our main business partners.
In this context, the exchange rate policy is carried out through the Exchange Rate Band Regime, which operates through the Foreign Currency Trading Electronic System [SENDI (by it initials in Spanish), through which the BCH offers in a daily foreign exchange auction, the foreign exchange (US dollars) demanded by the market through the authorized exchange agents, using as a reference for their bids the limits established in the exchange rate band. As a consequence, and in order to continue reflecting market signals, the Reference Exchange Rate (TCR, by its initials in Spanish) is the weighted average of the prices resulting from the Foreign Exchange Auction.
Parameters and Operating Mechanism
In the current exchange regime and under the operating mechanism of the Foreign Exchange Auction, the BCH uses an exchange band of one percent (1%) above and below the center of the exchange band, which will be formed by the average of seven (7) previous days of the Base Price weighted by 80% + Average of seven (7) previous days of the Weighted Average Exchange Rate of the Foreign Exchange Auction weighted by 20%; in other words, purchase requests will not be accepted in the Foreign Exchange Auction whose prices are higher than the ceiling or lower than the floor of the band.
The Monetary Authority reviews every five (5) events the level of the established Base Price, aiming to maintain the external competitiveness of the national currency. In this review, it is considered the spread between domestic and external inflation rate of the main trading partners of Honduras, the effective nominal Exchange rate index and the coverage of International Reserves; meanwhile, the average weighted Price of the Foreign Exchange Auction seeks to incorporate the behavior of the local currency market into the TCR.
The exchange agents must sell to the BCH 100% of the foreign exchange revenues of the day, no later than the following business day. 80% of the foreign currency purchased by the BCH from the foreign exchange agents will make up the amount to be auctioned by the BCH in the Foreign Currency Auction of the day.
In the Foreign Exchange Auction natural persons may submit bids for the purchase of foreign currency through an exchange agent up to US$100,000.00 (One hundred thousand U.S. dollars) per day through three (3) bids, which in aggregate do not exceed the maximum amount determined, and legal entities through an exchange agent up to US$1,200,000. 00 (One million two hundred thousand U.S. dollars) daily and up to three (3) offers that in aggregate do not exceed the maximum amount determined, the offers for the purchase of foreign currency are for a minimum of US$10,000.00 (Ten thousand U.S. dollars).
On the other hand, foreign exchange agents may submit daily one (1) request on their own account for up to US$2,000,000.00 (Two million U.S. dollars), to meet the demand of private sector clients who demand foreign currency for amounts lower than the minimum required to enter the Foreign Exchange Auction. Additionally, they may submit one (1) foreign currency purchase offer for up to US$1,500,000.00 (One million five hundred thousand U.S. dollars) per day, to meet payments for their own expenses.
In this context, the BCH maintains a policy of evaluating the foreign currency holding limits assigned to foreign exchange agents, in order to ensure that they guarantee the operability required for foreign currency trading.
