Venezuelan bolivar falls 10 pct as strike expands

Reuters, 01.08.03, 7:45 PM ET

CARACAS, Venezuela, Jan 8 (Reuters) - The Venezuelan bolivar plunged nearly 10 percent against the dollar on Wednesday as citizens, faced with a 48-hour bank shutdown during a five-week-long national strike, rushed to snap up the U.S. currency. The bolivar interbank rate <VEB=> <VEB2=> plummeted by nearly 10 percent against the U.S. greenback to an average low of 1,585 bolivars, traders said.

The Venezuelan Central Bank's reference rate <VEBFIX=> at the end of the day stood at 1,507/1,510.50 bolivars, a fall of 86.5 bolivars, or 5.7 percent, over Tuesday's close.

The battered currency has tumbled 12.3 percent, based on the official rate, since November 29, just before a general strike by opponents of President Hugo Chavez began on Dec. 2. The strike has now ground the South American nation's economy to a near standstill.

"Venezuelans are looking for refuge in the dollar, fearing that the 48-hour banking strike could be extended for a longer period," said Luis Oganes, a sovereign strategist at JP Morgan, who predicted further slippage in the exchange rate as the general strike persists. The bolivar, which has been falling steadily for at least six years, has shed more than 7 percent of its value against the U.S. currency since the start of the year.

It lost 46 percent against the dollar over 2002, when Chavez survived a short-lived coup against him in April by rebel military officers.

"Given that the government gains fiscally from currency depreciation, because oil revenues are received in U.S. dollars, it may actually have incentive to allow the currency to slide further in order to partially compensate for the impact of the strike on fiscal revenues," Oganes said.

Leaders of the Venezuelan bank workers' union Fetrabanca said on Wednesday a work stoppage at private and state banks would suspend banking services for 48 hours on Thursday and Friday. "That frightened a lot of people who went out and converted their bolivars into dollars, in case the situation gets worse," one trader said.

Opposition leaders said on Wednesday that they have prolonged the strike, aimed at forcing leftist President Hugo Chavez to resign and call elections in the world's No. 5 oil exporter, for a 39th day. The strike is strangling the country's oil production and exports, which account for half of government revenues and 80 percent of total export revenues.

Chavez was elected in 1998 vowing to wrest control from the country's corrupt elite and enact reforms to help the poor. But opposition has grown amid charges the president wants to establish a Cuban-style authoritarian state.