Bloomberg News

Colombian Peso Advances on Bets Dollar Purchases Not Enough

February 09, 2012

Feb. 8 (Bloomberg) -- Colombia’s peso rose to a five-month high on bets the central bank’s efforts to ease gains in the currency won’t be enough amid rising foreign direct investment and increased appetite for the nation’s financial assets.

The peso gained 0.2 percent to 1,779.50 per U.S. dollar at 12:12 p.m. Bogota time, from 1,782.10 yesterday. Earlier it touched 1,774.90, the strongest intraday level since Sept. 1. The peso has jumped 8.9 percent this year.

In a bid to ease gains in the peso, Colombia’s central bank said last week that starting Feb. 6 it will buy a minimum of $20 million a day for at least three months.

“Risk aversion has fallen and given all the liquidity in global markets and Colombia’s good fiscal figures, the central bank’s measures aren’t enough to counter the appreciation pressures,” said Andres Pardo, the head analyst at financial services holding company Corp. Financiera Colombiana, known as Corficolombiana.

Colombia is helping keep the peso competitive by avoiding bringing dollars, including at least $1 billion in dividends from oil producer Ecopetrol SA, into the country, Finance Minister Juan Carlos Echeverry said today in a conference call with investors. The peso is rallying as foreign investment is being sucked into Colombia by booms in mining and oil, he said.

“What we have seen over the last month or month and a half worries me,” Echeverry said. “We can’t risk losing lots of jobs because of the currency.”

Budget Deficit

Colombia’s consolidated budget deficit, which includes states, municipalities and state-run companies, was 2.2 percent of gross domestic product last year, compared with the government’s December estimate of 2.9 percent as strong economic growth boosts tax revenue, Echeverry said.

The yield on the government’s 10 percent peso bonds due July 2024 rose three basis points, or 0.03 percentage point, to 7.43 percent, according to the central bank. The bond’s price fell 0.231 centavo to 120.3770 centavos per peso.

The nation’s borrowing costs rose at an auction today of fixed-rate securities. The government sold peso bonds due August 2026 to yield 7.62 percent, the Finance ministry said in a statement, up from 7.49 percent at the last auction on Jan. 25. Colombia also sold bonds due October 2018 to yield 6.89 percent, the same yield at the previous auction, while the yield on the October 2015 securities rose to 6.42 percent from 6.28 percent, according to the statement.

--With assistance by Matthew Bristow in Bogota. Editors: Glenn J. Kalinoski, Brendan Walsh

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

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


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