By Guillermo Parra-Bernal
June 4 (Bloomberg) -- Venezuela's currency weakened in unregulated markets as investors and companies bought dollars to protect their money from quickening inflation.
The bolivar weakened in the parallel market to 4,100 bolivars to the U.S. dollar at 10:30 a.m. New York time from 4,080 bolivars on June 1, traders said. The decline widened the bolivar's losses this year to 21 percent, the biggest drop among 71 currencies tracked by Bloomberg.
Venezuelans are pulling money out of the country as a two- fold increase in government spending over the past two years fuels the highest inflation rate in Latin America. Annual inflation accelerated in May to 19.5 percent, its fastest in three months.
Opponents to President Hugo Chavez and supporters of Radio Caracas Television, Venezuela's most-watched channel and which Chavez closed on May 27, plan to stage peaceful protests across Caracas and other cities this week, adding to investors' concerns. The closure triggered criticism that Chavez was curbing free speech and sparked street protests that have extended for nine days. Investors will be attentive to how the marches go, said Henry Travieso, a trader with Global Capital Valores in Caracas.
``You could call the situation a tense calm,'' said Giorgio Milani, a trader with Caracas-based Sequoian Sociedad de Corretaje de Valores CA, said. ``There are several reasons why demand for dollars should remain high for some time: the politics, the excess liquidity, consumer prices.''
Venezuela pegs the bolivar at an official exchange rate of 2,150 bolivars per dollar under restrictions Chavez imposed in February 2004. Venezuelans turn to unregulated markets when they can't get approval from the government's Foreign Exchange Administration Commission to buy dollars at the official exchange rate.
Source : www.bloomberg.com
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