CORRECTED - Costa Rica cenbank intervenes as currency slides

(Corrects 5th paragraph to read 2006, not last October)

SAN JOSE, Costa Rica, May 23 (Reuters) - The end of the tourism season and a seasonal drop in trade has caused a shortage of dollars in Costa Rican markets and sent the local colon currency plummeting to a new life low this week.

The colon was at an all-time low of 527.82 to the dollar on Friday, and its slide in recent weeks has obliged the central bank to pump dollars into the system to meet growing demand, the central bank said on Friday.

"We are in a period of the year where the amount of dollars in the market tends to fall, and some banks over-reacted (buying up dollars) and we saw it necessary to intervene," central bank economist Jorge Madrigal told Reuters.

The bank has acted to shore up the colon twice in the last two weeks, intervening for the first time since a new exchange rate system was brought in last year.

In 2006, the central bank replaced the fixed reference rate policy that had been used to gradually devalue the currency over two decades and set trading bands for the colon.

It widened the bands in November, setting a floor at 498.39 colones per dollar and a ceiling at 562.83.

Until the bank intervened on May 8, the colon had been pushing down on the lower end of the range as it gained against the dollar. (Reporting by John McPhaul)