Since 2022, the informal currency market in Cuba has experienced a rollercoaster of highs and lows, with spectacular peaks followed by apparent corrections.
However, after each correction, the starting point is no longer the same: the dollar and the euro never return to their previous level. What explains this dynamic?
The independent medium elTOQUE has dedicated an analysis to the phenomenon, naming what is happening: overshooting, or in Spanish, sobrerreacción cambiaria.
What is overshooting?
The concept was described by the economist Rudi Dornbusch in 1976.
Exchange Rate Evolution
According to his theory, when an economy faces a sudden change—such as a new monetary policy, a devaluation, or a crisis of confidence—economic agents tend to react excessively.
In the short term, foreign currencies rise much more than what real economic fundamentals would justify. Subsequently, the market adjusts, but never back to the original point; instead, a new, higher equilibrium is established.
As explained by elTOQUE, this pattern has been evident at several key moments in the Cuban informal market.
First big leap: August - October 2022
The implementation of the new currency exchange scheme at 120 CUP per dollar triggered the first major shock.
In a matter of weeks, the exchange rate of the dollar and the euro reached 200 CUP, driven by deep uncertainty and limited real supply.
Then, when "expectations cooled down," a correction occurred down to 165 CUP.
elTOQUE identifies it as the first clear overshooting, a “speculative peak followed by a partial correction.”
Second episode: July–September 2023
A year later, the phenomenon repeated itself.
Rumors about exchange rate adjustments and new controls fueled another sharp increase, this time between 215 and 225 CUP.
Then what elTOQUE refers to as a "reality check" arrived: the value fell back to a range of 190-200 CUP. Once again, it was a correction without a return to the previous level.
Third peak: May - June 2024
The situation became even more volatile. The dollar surged to nearly 400 CUP, resulting in a stampede fueled by what's known as the "herd effect": everyone was buying because everyone was buying.
But this time there was an unprecedented factor: the interference organized by the Cuban government.
More than 2,000 social media accounts began posting messages against the representative rate calculated by elTOQUE, even promoting false offers to manipulate the algorithm.
This caused a temporary drop in the rate, which fell below 300 CUP, but it was “a noise effect”.
“The people believed that the price was falling, some sold, and the TRMI… reflected that temporary distortion,” argues elTOQUE in its analysis:
2025: From Peaks to Trends
Unlike previous years, in 2025 there has not been an explosive peak followed by a rapid decline.
In contrast, there has been a sustained increase in foreign currencies, reaching historic figures, such as 490 CUP per dollar.
According to the Observatory of Currencies and Finance (OMFi), since September, speculative factors have been added to the structural demand for foreign currency:
"To the demand for foreign currency for more commercial reasons […] speculative purchases have been added."
This phenomenon triggered a sharp correction: the dollar fell from 490 to 420 CUP, which it reached this very Wednesday.
But, is this a new overreaction or is it influenced by other factors?
Disinformation and digital manipulation
ElTOQUE points out two key factors:
-The passage of Hurricane Melissa, which could temporarily slow down economic activity.
A new disinformation campaign, launched on October 22 by the Communist Party to discredit the Representative Rate of the Informal Market (TRMI).
Messages like “The dollar is collapsing, thanks to the people!” or “elTOQUE will no longer be able to manipulate anymore” flooded Facebook and WhatsApp groups.
The media argues that hundreds of fake profiles, recently created and featuring images generated by artificial intelligence, shared the image of the phrase “No to the TOQUE.”
elTOQUE summarizes it this way: “It was an organized action. The intention is to create the feeling of a massive rejection and, above all, to question the legitimacy of the TRMI.”
Can a disinformation campaign lower the price of the dollar?
Yes, but only temporarily. The analysis is clear: “Campaigns of this kind do not change the fundamentals of the market: they do not create currency, do not reduce inflation, and do not restore confidence.”
By creating confusion, some people decide not to buy, while others sell out of fear, which leads to a temporary decline.
However, elTOQUE emphasizes that the market is readjusting because as long as the scarcity of dollars, inflation, and lack of confidence persist, upward pressure remains latent.
elTOQUE warns: “The official narrative tries to capitalize on a technical respite to support its thesis, but the real foundations […] remain intact.”
What does all this reveal about the Cuban economy?
Ultimately, the highs and lows in the informal currency market in Cuba are not mere accidents.
They reflect a fragile economy, lacking anchoring policies and structural solutions.
The use of overshooting as an analytical lens allows us to understand why, even though the dollar “drops” after each peak, it never returns to its previous level.
Each rise is driven by expectations, rumors, distrust, and need. Each drop is merely temporary, an illusion, a partial adjustment. elTOQUE sums it up perfectly:
“The volatility of the informal Cuban foreign exchange market reflects an economy without anchors and without solutions to the multiple crises that engulf it.”
And add one final warning: “When the rate goes up, authorities do not discuss the causes, but the reflection.”
The independent Cuban media concludes that informal rates of the dollar and euro serve as indicators of a crisis-ridden economy, and that disinformation campaigns may temporarily skew perception, but do not change the underlying reality.
The TRMI, far from being the problem, is one of the few honest mirrors in which one can see the true value of the Cuban peso.
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