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Venezuela's Chavez Announces Currency Devaluation
Venezuela's Chavez announces currency devaluation, first since 2005
CARACAS, Venezuela January 8, 2010 (AP)

Venezuelan President Hugo Chavez on Friday announced a currency devaluation for the first time since 2005.

Chavez said Venezuela's currency, the bolivar, will now have two government-set rates depending on the use, either 2.60 to the dollar for transactions deemed priorities by the government or 4.30 to the dollar for other transactions.

The devaluation dropped the currency's value by 17 percent or 50 percent, depending on the tier.

The currency's official exchange rate has been held steady by the government at 2.15 bolivars to the dollar since 2005.

Chavez also said the government will intervene in the lucrative parallel bond market, where the bolivar has recently been fetching about one-third of the official rate. He did not give details about what actions the government would take.

The devaluation comes as the oil-exporting country struggles with a recession and 25 percent inflation, the highest in Latin America.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

CARACAS, Venezuela (AP) — Venezuelan President Hugo Chavez has announced a currency devaluation for the first time since 2005.

Chavez says Venezuela's currency, the bolivar, will now have two government-set rates depending on the use, either 2.60 to the dollar for transactions deemed priorities by the government or 4.30 to the dollar for other transactions.

The currency's official exchange rate has been held steady by the government at 2.15 bolivars to the dollar since 2005.

Chavez also said Friday night that the government will intervene in the lucrative parallel bond market, where the bolivar has recently been fetching about one-third of the official rate. He did not give details about what actions the government would take.

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http://abcnews.go.com/Business/wireStory?id=9517713

Chavez says military will monitor Venezuelan prices

(CNN) -- In the wake of his decision to devalue Venezuela's currency, President Hugo Chavez on Sunday said he would put the military on the streets to ensure that business owners don't raise prices.

Speaking on his weekly television program, "Alo Presidente," Chavez railed against merchants who re-price their items in reaction to Friday's announcement that the Venezuelan bolivar currency, which had been fixed at 2.15 to the U.S. dollar since 2005, was devalued to 4.3 to the dollar. For food and medicine, Chavez announced a second fixed exchange rate for these "necessity" goods at 2.6 bolivares to the dollar.

"I want the national guard in the streets, with the people, to fight speculation," Chavez said, calling re-pricing a form of robbery.

A devaluation makes foreign products relatively more expensive for domestic consumers, discouraging imports.

Chavez showed a photograph in a newspaper of consumers in long lines over the weekend to buy goods, fearing that the sharp devaluation could result in higher prices.

The president blamed such lines on "teleterror," saying that opposition media outlets were fueling a panic.

"At this moment, there is absolutely no reason for anyone to raise the prices of anything," Chavez said.

He encouraged people to publicly denounce businesses where prices increase and threatened to expropriate businesses that do.

The government would transfer ownership of such businesses to the workers, Chavez said.

http://www.cnn.com/2010/WORLD/americas/01/10/venezuela.chavez.devaluation/index.html