Bloomberg News

Colombian Peso Jumps to Four-Month High on Rising Investment

January 12, 2012

Jan. 12 (Bloomberg) -- Colombia’s peso advanced to an almost four-month high amid increased foreign investment flows into the South American country.

The peso climbed 0.6 percent to 1,838.35 per U.S. dollar, from 1,850 yesterday. Earlier it touched 1,835.90, the strongest level since Sept. 19. The peso has jumped 5.5 percent so far this year, the best performance among world currencies tracked by Bloomberg.

“The peso has been strengthening at an accelerated and at times disorderly pace,” said Andres Munoz, the head currency trader at financial services holding company Corp. Financiera Colombiana, known as Corficolombiana, in Bogota. “Colombia’s good fundamentals and the interest rate differential are attracting oil and portfolio flows from abroad.”

Foreign direct investment jumped 56 percent to $14.8 billion in 2011 from a year earlier, with 82 percent going into oil and mining, according to preliminary trade balance data from the central bank. Foreign investment into stocks and bonds jumped almost four-fold to $989 million in the last three months of 2011 from $263 million in the third quarter, according to the central bank data.

Gains in the peso may ease as it approaches 1,835, which is a resistance level, said Munoz.

Colombia’s economy expanded 7.7 percent in the third quarter from a year earlier, the fastest pace since the fourth quarter of 2006. The economy may grow as much as 6 percent in 2011, the fastest pace since 2007, according to the central bank.

Dollar Bonds

Policy makers in November raised the key rate a quarter percentage point to 4.75 percent, citing the need to bolster the central bank’s credibility after “strong” growth drove up inflation expectations, according to minutes of the meeting. The central bank left the rate unchanged in the Dec. 16 meeting.

Meanwhile in the U.S., the Federal Reserve has pledged to hold interest rates near zero until at least mid-2013.

Colombia sold $1.5 billion of securities due 2041 yesterday to yield 4.964 percent, in its first overseas offering since July, to help finance 2012 budget needs in dollars and fund a debt buyback. The government won’t bring in proceeds from the sale into the local market, the Finance Ministry said in a statement yesterday.

The yield on the nation’s 10 percent bonds due in July 2024 fell five basis points, or 0.05 percentage point, to 7.39 percent, according to the stock exchange. The price on the peso bonds, known as TES, rose 0.453 centavo to 120.772 centavos.

--Editor: Marie-France Han

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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