Oct. 6 (Bloomberg) -- Peru’s sol posted its biggest two-day gain in more than four months as moves by the European Central Bank to shore up the euro region’s money market spurred demand for higher-yielding, emerging-market assets.
The sol strengthened 0.5 percent to 2.7495 per U.S. dollar, from 2.7630 yesterday. That brought its advance over the past two days to 1 percent, the most since May 12-13.
The ECB will start buying covered bonds and offer banks two additional unlimited loans, ECB President Jean-Claude Trichet said today after policy makers left the benchmark interest rate at 1.5 percent. Federal Reserve Chairman Ben S. Bernanke on Oct. 4 signaled he’ll push forward with further expansion of monetary stimulus if needed to boost U.S. growth.
“Overseas investors are buying soles again as international markets are calmer,” said Mario Guerrero, an economist at Scotiabank Peru in Lima. Peruvian banks may seek to reduce their “heavy” dollar holdings as the sol strengthens, Guerrero said.
Peruvian banks’ net dollar holdings, including forward contract obligations, totaled $425 million on Oct. 4, according to the central bank. The banks had a negative dollar position a month earlier.
The Andean nation’s central bank will probably leave its benchmark rate at 4.25 percent for a fifth month today, according to 17 of 18 analysts surveyed by Bloomberg. The bank will announce its decision at about 7 p.m. New York time.
The central bank didn’t buy or sell dollars in the foreign exchange market today.
The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 dropped 10 basis points, or 0.1 percentage point, to 5.81 percent, according to prices compiled by Bloomberg.
--Editors: Brendan Walsh, Glenn J. Kalinoski
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