Bloomberg News

Colombian Peso Weakens as Declines in Equities Reduce Demand

October 13, 2011

Oct. 13 (Bloomberg) -- Colombia’s peso fell for the first day in three as declines in global equities eroded demand for higher-yielding, emerging-market assets.

The peso slipped 0.3 percent to 1,901.03 per U.S. dollar, from 1,896 yesterday. It has dropped 4.6 percent in the past month, the worst performance after the Chilean peso among the six most traded currencies in Latin America.

European stocks fell from a two-month high as the European Central Bank warned imposing further losses on holders of Greek debt posed a risk to the euro area’s financial stability. U.S. stocks also fell today, paring gains from the best Standard & Poor’s 500 Index rally over seven days since 2009.

“Uncertainty surrounding the global environment, including growth, continues to hurt demand for risk,” said Daniel Lozano, an analyst at brokerage Serfinco SA in Bogota.

The yield on Colombia’s benchmark 10 percent bonds due in July 2024 fell one basis point, or 0.01 percentage point, to 7.46 percent. The bond’s price rose 0.088 centavo to 120.408 centavos per peso.

The yield earlier rose to as high as 7.54 percent after analysts increased their year-end inflation expectations.

Economists covering the Colombian economy raised their year-end inflation forecast to 3.42 percent this month from 3.23 percent in the September survey, according to the median forecast in a central bank survey of 38 economists published yesterday. The results follow an Oct. 5 government report that showed annual inflation quickened to 3.73 percent last month, higher than the 3.43 percent median estimate in a Bloomberg survey.

‘Temporary Shock’

“There’s some concern rains in Colombia will push food prices higher,” said Lozano. “We see that as a temporary shock.”

Colombia’s consumer prices rose 0.31 percent in September from the previous month, driven by higher housing and food costs, after declining 0.03 percent in August, according to the government report. Policy makers have said inflation will end this year around 3 percent, the mid-point of the central bank’s 2 percent to 4 percent target for this year.

Most of the analysts expect Colombia’s benchmark lending rate to remain unchanged at 4.5 percent through year end, according to the central bank survey. A month ago the majority of economists surveyed expected the key rate to end at 4.75 percent.

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

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


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