Colombia Peso Falls to Weakest Since July on Additional Currency Measures
By Andrea Jaramillo - Oct 26, 2010 2:12 PM CT
Bloomberg
Colombia’s peso fell to the weakest level since July on bets the central bank will announce further measures to ease the peso’s rally after President Juan Manuel Santos said the nation will take additional steps this week.
The peso dropped for a fourth day, declining 0.6 percent to 1,840.35 per U.S. dollar at 2:34 p.m. New York time, from 1,829.90 yesterday. It reached its weakest level since July 30. The peso has jumped 11.1 percent this year, the best performance among six major Latin American currencies tracked by Bloomberg.
Colombia has been studying measures “carefully” given the “complicated” situation, Santos said Oct. 23, according to comments posted on the presidential website. Policy makers will meet Oct. 29 for the central bank’s monthly monetary policy meeting. Finance Minister Juan Carlos Echeverry is also president of the central bank’s board.
“The market is very expectant of what may be announced at this Friday’s meeting,” said Carlos Ramos, an analyst at Interbolsa SA, Colombia’s biggest brokerage. “Verbal intervention has worked so far, but the market is now waiting for specific measures.”
The central bank said Sept. 15 it will buy a minimum of $20 million daily for at least four months. The peso has dropped 2.7 percent since the daily dollar purchases began.
Banco de la Republica may announce “more aggressive” dollar purchases as it faces political pressure to help ease the peso’s appreciation, Bank of America Corp.’s economist Alejandro Rivera wrote in a report today.
While Banco de la Republica will likely leave its overnight lending rate unchanged at 3 percent at the Oct. 29 meeting, “it is increasingly likely that the bank’s next action will be a rate cut,” Rivera wrote.
Interbolsa’s Ramos predicts central bankers will lower the key lending rate this month by as much as 50 basis points. He also predicts Banco de la Republica will limit borrowing abroad.
“A set of measures will probably be more effective than just one,” said Ramos.
To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net