REFILE-Venezuela cuts three zeros off bolivar currency

(Refiles to fix typo in third paragraph)

CARACAS, Jan 1 (Reuters) - Venezuela opened the New Year on Tuesday by revamping its bolivar currency in an effort by the government of President Hugo Chavez to tackle the highest inflation in the Western Hemisphere.

The bolivar’s official exchange rate is now 2.15 bolivars per dollar, compared with the previous official rate of 2,150 per dollar. The change does not constitute a devaluation since the prices of goods in bolivars are expected to be reduced by the same amount.

Supporters said the move will make accounting easier and tame inflation of 20.7 percent in the 12 months to November, though critics call it a cosmetic change that does not address the underlying causes of the OPEC nation’s price instability.

“It will give us favorable expectations ... in the battle that all Venezuelans must wage to control inflation, to strengthen our currency,” said Finance Minister Rodrigo Cabezas in an interview with state television on the eve of the change.

Economists said the monetary conversion will cause confusion and even fuel inflation as a result of rounding, and say the government must reduce burgeoning monetary liquidity and slow spending of record oil revenue to control consumer prices.

Government leaders say the measure will have a positive psychological effect on consumers by demonstrating the strength of the bolivar.

Venezuela’s 2006 inflation was 17 percent, and reached 18.6 between January and November of 2007.

The finance ministry said new bills would be available in some businesses and cash machines on Tuesday. The government will slowly phase out the old bills and coins over the coming months. (Reporting by Fabian Cambero; Writing by Brian Ellsworth)