Bloomberg News

Colombian Peso Gains for Fourth Week on Interest-Rate Outlook

February 09, 2012

Jan. 27 (Bloomberg) -- Colombia’s peso rose for a fourth week, the longest winning streak since July, amid higher foreign investment inflows and as speculation the central bank will continue raising interest rates boosted demand for the nation’s higher-yielding assets.

The currency advanced 0.9 percent this week to 1,807.03 per U.S. dollar. It gained 0.2 percent today, from 1,810.8 yesterday. The peso yesterday touched 1,794.51, the strongest level since Sept. 9.

Betting the Colombian peso will gain has proven to be the most profitable risk-adjusted trade in the foreign-exchange market this year as policy makers raise interest rates to keep inflation in check. The higher rates have attracted increasing foreign inflows as investors purchase the country’s higher- yielding assets with money borrowed in countries where rates are lower, a practice known as the carry trade, said Julian Marquez, an analyst at Interbolsa SA, Colombia’s biggest brokerage.

“Not only do you have the carry trade, but the economy is expanding, which makes Colombian assets attractive,” said Julian Marquez, an analyst at Interbolsa SA, Colombia’s biggest brokerage.

Most economists surveyed by the central bank for a report published Jan. 12 forecast policy makers will keep the key lending rate at 4.75 percent at their meeting on Jan. 30, before raising it a quarter point to 5 percent in February and to 5.5 percent by year-end.

Colombia’s economy grew 7.7 percent in the third quarter from a year ago, the fastest pace since the fourth quarter of 2006. It may have grown as much as 6 percent in 2011, the fastest pace since 2007, according to the central bank.

Foreign-direct investment in Colombia jumped 58 percent in 2011 to a record $15 billion, with 81 percent going into oil and mining, according to trade balance data from the central bank.

The yield on Colombia’s benchmark 10 percent bonds due in July 2024 rose six basis points, or 0.06 percentage point, to 7.33 percent. The bond’s price fell 0.574 centavo to 121.26 centavos per peso.

--Editors: Richard Richtmyer, 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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