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Venezuelan Currency Falls

September 5, 2001

CARACAS, Venezuela (AP) _ The Venezuelan bolivar took a dip Wednesday in a session of active trading after President Hugo Chavez suggested he might declare a state of emergency to stem demand for dollars.

The bolivar ended at a midrate of 741.25 to the dollar compared to Tuesday’s 738.50 close, according to the Central Bank.

Dollar ``demand was high due to the statements made by the president,″ one currency trader said.

Late Tuesday, Chavez said he has the option of declaring a ``state of emergency″ to implement measures aimed at defending the bolivar. The left-leaning president often lambasts ``speculators″ who buy dollars and take them abroad.

In May, capital flight surged after Chavez threatened to declare a state of emergency to combat corruption and crime, prompting speculation that he would impose foreign-exchange controls.

The Central Bank controls the bolivar’s devaluation within a plus or minus 7.5 percent band, whose central parity is set to depreciate 7 percent this year.

Chavez has said he will not devalue the bolivar, which many economists say is overvalued by anywhere from 20 percent to 80 percent.

A Central Bank director recently vowed the institution would deplete its dollar reserve before the resorting to devaluation, a statement most economists dismissed as rhetoric.

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