Parallel Rate Has Further To Fall

Venezuela's black-market bolivar rate (VEF*) continues to weaken in line with our core view. The exchange rate currently stands at VEF*6.5300/US$, having depreciated in recent weeks despite pervasive dollar weakness and rising oil prices. As regular readers will know, we have been bearish towards the Venezuelan parallel rate for some time, arguing that if oil prices did not return to their 2008 highs, the Venezuelan government would face huge pressure to restrict the amount of dollars it supplies to the swap market. The failure of the rally in oil prices to prevent VEF* depreciation is testament to the underlying weaknesses

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