Dominican Central Bank rejects peso overvaluation claims

The Dominican Central Bank (BCRD) has refuted claims by analysts that the Dominican peso is overvalued. The bank asserts that the currency's recent appreciation reflects a natural adjustment to changing international financial conditions, rather than an artificial intervention. It maintains that the peso's performance is supported by robust macroeconomic fundamentals and a consistent expansion in the country's primary sources of foreign currency.

According to Elisa Vilorio de Painter, advisor to the BCRD governor, the U.S. dollar has depreciated approximately 5.28% since April 2025. Concurrently, the Dominican Republic has experienced a sustained increase in foreign exchange inflows. By the end of July, the peso had appreciated by 8% compared to the close of 2025 and by 4.4% year-on-year. The Central Bank highlighted that its inflation targeting regime, reserve accumulation, and financial stability have enabled the exchange rate to function effectively as a shock absorber.

The appreciation of the peso is attributed to solid economic foundations that create a foreign exchange supply exceeding demand. Tourism revenue reached a record $6.716 billion in the first semester, providing a steady dollar inflow. Foreign direct investment (FDI) contributed $3.2765 billion in the same period, while total exports grew by 16.6% to $8.7457 billion compared to the first half of 2025. Remittances from the Dominican diaspora also added significantly, reaching $6.2913 billion, further bolstering the foreign exchange market.

These combined inflows represent an additional $2.8 billion compared to 2025, contributing to both exchange rate stability and the accumulation of international reserves. The Central Bank noted that the current account deficit remains stable, projected at around 1.3% of GDP for the year, a deficit that FDI is expected to cover nearly three times over. The bank finds it noteworthy that the current account deficit remains stable despite increased demand for foreign currency to cover oil imports due to high international prices.