Bloomberg News

Peru Sol Rises to Three-Year High on Tax Payments, U.S. Outlook

February 24, 2012

Feb. 24 (Bloomberg) -- Peru’s sol rose to a three-year high as companies bought the currency to pay local taxes and as reports bolstered confidence in the U.S. economy, spurring demand for higher-yielding, emerging-market assets.

The sol climbed less than 0.1 percent to 2.6780 per U.S. dollar at today’s close, from 2.6790 yesterday, according to Deutsche Bank AG’s local unit. That’s its strongest level since at least December 2008.

Investor appetite for the currency grew as purchases of new homes in the U.S. exceeded economists’ forecasts in January, and a gauge of consumer confidence topped estimates. Finance ministers and central bank governors from the Group of 20 nations meet tomorrow in Mexico and may discuss committing fresh cash to the International Monetary Fund to defuse Europe’s debt crisis.

“In uncertain times such as now, Peru has performed very well,” said Mike Moran, a currency strategist at Standard Chartered Bank in New York. “The risk-reward in the currency is very good.”

The central bank bought $42 million in the spot currency market today to slow the sol’s gains. It paid an average 2.6790 soles per dollar, the bank said in a statement on its website.

The gains may continue considering local banks’ net dollar holdings remain “high” at about $300 million, BBVA Banco Continental said in an e-mailed note to clients. Banks’ dollar holdings have historically been about $150 million, it said.

Peru’s exports rose 21 percent to $3.59 billion in January from a year earlier, as exports of commodities led by gold and copper climbed 23 percent to $2.78 billion, industry group Comexperu said in an e-mailed statement.

The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell two basis points, or 0.02 percentage point, to 5.52 percent, according to prices compiled by Bloomberg. The price rose 0.11 centimo to 115.47 centimos per sol.

--Editors: Glenn Kalinoski, Brendan Walsh

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

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


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