Wednesday, May 31, 2023

Colombia’s Peso Strengthens for Fifth Day Ahead of Fed Meeting

Colombia’s peso rose for a fifth day on speculation the Federal Reserve will announce additional measures to stimulate the world’s biggest economy.

The peso climbed less than 0.1 percent to 1,796.85 per U.S. dollar, extending its winning streak to the longest since April. The peso has jumped 7.9 percent this year, the best performance after the Chilean peso among the six most-traded currencies in Latin America.

“There’s a lot of optimism on what may come out of the Fed,” said Julian Marquez, an analyst at brokerage Interbolsa SA. “For now, the market is in a wait-and-see mode.”

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Global stocks rose before a two-day meeting starting tomorrow in which the Federal Open Market Committee will discuss additional measures to stimulate the U.S. economy. Fed Chairman Ben S. Bernanke said Aug. 31 he wouldn’t rule out steps to lower an unemployment rate he described as a “grave concern.”

To stem the peso’s rally, Colombian President Juan Manuel Santos said Sept. 7 that the government will keep buying dollars in the spot market and urged the central bank to increase its own purchases of the greenback.

Finance Minister Mauricio Cardenas said today he is concerned about the peso’s rally and that the government has “a lot of unused ammunition” to stem the gains. Last week he said the Treasury will continue to supplement the central bank’s dollar purchase program and that it won’t announce the size of its purchases.

Economic Expansion

“There’s not much the government can do to stem the peso’s appreciation,” Marquez said. “Strong investment flows continue to come in and the economy is expanding at a relatively strong pace, making Colombia attractive.”

The government forecasts the economy will grow 4.8 percent this year. It expanded 5.9 percent in 2011 as domestic demand and record foreign investment helped drive the fastest economic expansion since 2007.

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Colombia’s central bank bought today $25.1 million in the spot market, up from the minimum of $20 million a day the bank has said it will buy until at least Nov. 2. Banco de la Republica said on Aug. 24 that it would boost dollar purchases to $700 million by the end of September, or an average of $28 million a day.

The yield on 10 percent peso-denominated debt due July 2024 was little changed at 6.53 percent, according to the central bank.

From Bloomberg

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