Bloomberg News

Peru Sol Climbs to One-Month High on Copper, Local Tax Payments

October 10, 2011

Oct. 10 (Bloomberg) -- Peru’s sol rose to a one-month high as copper prices climbed and local businesses sold dollars to pay taxes in the local currency.

The sol strengthened 0.6 percent to 2.7280 per U.S. dollar, its strongest since Sept. 9, at 1:53 p.m. Lima time.

Higher prices for copper, of which Peru is the world’s third-biggest producer, bolster the currency as investors seek local securities, said Gonzalo Navarro, head foreign exchange trader at Banco Santander in Lima.

“Peru is a major metals producer and rising commodities prices helps the local stock exchange and brings in dollars,” Navarro said. “There is also some dollar selling ahead as companies seek soles to pay taxes.”

Trading was slower today due to the U.S. bank holiday, he said.

Copper rose to the highest in almost two weeks after the leaders of France and Germany pledged a plan to stem Europe’s debt crisis in three weeks.

Peru, which trails Chile and China in copper production, increased exports of the metal by 74 percent in August compared with a year earlier. Mining exports, which make up two-thirds of the country’s shipments overseas, climbed 62 percent to $2.75 billion, the government’s customs duty collection agency reported on Oct. 6.

The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell five basis points, or 0.05 percentage point, to 5.76 percent, according to prices from Citibank Peru.

The extra yield investors demand to own Peruvian government bonds instead of U.S. Treasuries fell two basis points to 259, according to JPMorgan Chase & Co.

Peru’s central bank decided last week to keep its overnight rate at 4.25 percent for a fifth month as the threat of recession in Europe and the U.S. outweighs above-target inflation. The decision matched the estimates of 17 of 18 economists surveyed by Bloomberg.

--Editors: Glenn J. Kalinoski, Marie-France Han

To contact the reporter on this story: Drew Benson in New York at abenson9@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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