The exchange rate of the Paraguayan Guarani (PYG) against the US Dollar (USD) has recently seen a sharp decline, drawing attention. According to data released on September 8, the USD exchange rate closed at G. 7,174, a 1.3% weekly drop. The cumulative decline for the year now stands at 8.3%, signaling a significant shift in the Paraguayan economy.

The decline in the dollar's value is attributed to a combination of regional and domestic factors. In addition to the general weakening of the dollar across South America, Paraguay's robust exports and an increase in foreign investment have contributed to the stable exchange rate. The significant rise in agricultural exports, particularly soybeans, has boosted foreign currency supply, which has been a primary cause of the dollar's depreciation. Furthermore, the fact that the Central Bank of Paraguay (BCP) did not intervene in the foreign exchange market in July suggests a reflection of the market's autonomous flow.

The Central Bank of Paraguay's August 2025 Economic Variable Forecast (EVE) report supports this downward trend. According to the report, economic experts have lowered their year-end exchange rate forecast to G. 7,700 and anticipate a level of G. 7,850 by the end of 2026. Despite the recent sharp drop in the dollar's value, experts expect the dollar to gradually recover in the long term.

This prediction appears to be based on the US Federal Reserve's (Fed) interest rate policy and changes in the global economic situation. If the US implements a higher-than-expected interest rate hike or if a global economic downturn deepens, demand for the US dollar as a safe-haven asset could increase again.

A weaker dollar has a positive effect on stabilizing import prices and curbing inflation. The increased purchasing power of the Guarani could lead to an increase in the real income of citizens. On the other hand, it could be disadvantageous for export companies that earn revenue in dollars, as they might incur losses when converting their export proceeds into Guarani.

These currency fluctuations, while demonstrating the soundness of the Paraguayan economy, will be an important consideration for future economic policy formulation. The Central Bank is expected to pursue policies that balance the dual goals of managing foreign exchange market volatility and stabilizing inflation.

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