CORRECTED - UPDATE 1-Venezuelan bolivar battered on strike fears

www.forbes.com Reuters, 01.15.03, 1:22 PM ET A corrected repetition follows. By Silene Ramirez

CARACAS, Venezuela, Jan 15 (Reuters) - Venezuela's bolivar fell 7 percent in interbank trading on Wednesday, closing down 3.4 percent against the U.S. dollar after Central Bank intervention to prop up the currency, which hit new lows on the 45th day of a general strike.

The bolivar slid early Wednesday to 1,770, triggering intervention by the Central Bank, which sold an estimated $30 million in addition to the $30 million it had already offered during the day's dollar auction sessions, traders said.

"The foreign exchange market is crazy. People aren't looking at the price. What they want is to have dollars in their hands," one trader said.

"When the demand was unstoppable, and it looked as though the price had no limit, the Central Bank came in hard selling dollars to push it below 1,770 bolivars," another trader said.

The Venezuelan currency has fallen sharply in recent days as the national strike grinds on with no end in sight.

The strike by opponents of President Hugo Chavez, who want him to resign and hold early elections, has severely disrupted oil production and shipments by the world's No. 5 petroleum exporter.

The interbank rate <VEB=><VEB2=> closed at an average of 1,695.25 bolivars to the dollar, down 57.75 bolivars from Tuesday's interbank close of 1,637.50 bolivars. This followed declines of 4 percent on Tuesday and 5 percent on Monday.

HARDENING POSITIONS The Venezuelan Central Bank's bolivar reference rate , the overall official average calculated at the end of the trading session, was down 3.2 percent against the dollar on Tuesday at 1,612.50 bolivars.

Measured by this rate, the bolivar has lost 13 percent of its value against the dollar since the start of the year, and 18 percent since the strike started Dec 2.

Signaling a hardening of the government's position against the strikers, Chavez blasted them as "terrorists" on Tuesday and said he would not negotiate with them.

By throttling the country's oil income, the strike is pushing the already weakened economy further into recession.

Vice President Jose Vicente Rangel said on Tuesday the government had no intention of holding early elections and was aiming to try to rule to the end of its term in 2007.

In a bid to break the deadlock, the United States and other countries are moving to set up a "friendly nations" group to back efforts by the Organization of American States to broker an agreement on elections. Mexico and Argentina said on Tuesday they were willing to be part of such a group.

Chavez and other regional leaders were due to meet in Quito on Wednesday to attend the swearing-in of Ecuador's new president, Lucio Gutierrez. They were expected to discuss the "group of friends" initiative.

The oil industry strikers have said they would continue the shutdown until Chavez quits or agrees to hold early elections.

Chavez, the outspoken former paratrooper who was elected in 1998 and survived a coup last April, has vowed to beat the strike.