Monday, September 25, 2023

Colombian Peso Advances Most in Two Weeks on Fed Stimulus Bets

Colombia’s peso rose the most in two weeks on speculation the Federal Reserve will take action to bolster growth in the world’s biggest economy.

The peso climbed 0.9 percent to 1,773.45 per U.S. dollar at 9:59 a.m. in Bogota, poised for the biggest increase on a closing basis since June 5. The peso has jumped 9.3 percent against the dollar this year, the best performance among all of the 170 currencies tracked by Bloomberg.

“After the Greek elections, the market is fairly optimistic on what can come out of the Fed meeting,” said Camilo Perez, the head analyst at Banco de Bogota, the nation’s second-biggest bank.

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Greek politicians may agree today to form a government and to seek relief from austerity measures imposed as a condition for bailout loans, probable coalition partners said. Twelve of 21 primary dealers who trade with the U.S. central bank expect some form of added stimulus from the Fed meeting today and tomorrow, while nine expect no action.

Fitch Ratings kept Colombia’s credit rating at BBB-, the lowest level of investment grade, with a stable outlook, according to a statement today.

Colombia has been less successful than other countries in the region at curbing currency gains, Finance Minister Juan Carlos Echeverry said last week. More central bank intervention in currency markets is compatible with low and stable inflation, he said.
Dollar Inflows

Central bank chief Jose Dario Uribe said in an interview last week that Colombia wants a weaker exchange rate and that policy makers won’t rule out bigger dollar interventions. The bank’s next monetary policy meeting is scheduled for June 29.

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Increased dollar inflows as companies bought pesos to pay for local taxes between June 8 and June 25 have helped fuel the local currency’s rally, according to Perez. After tax payments end this month, the peso will likely weaken in line with other currencies in Latin America, he said.

“It will become more vulnerable to movements in external markets,” Perez said. “In that sense, more currency measures won’t be necessary.”

Banco de la Republica has said it will buy a minimum of $20 million daily in the spot market until at least Nov. 2, while the government is keeping abroad dividends from state-run oil company Ecopetrol SA (ECOPETL) to avoid strengthening the peso.

The yield on Colombia’s 10 percent peso-denominated debt due in July 2024 fell three basis points, or 0.03 percentage point, to 7.03 percent, according to the central bank. The bond’s price rose 0.303 centavo to 123.689 centavos per peso.

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