Peru’s sol posted its steepest weekly decline since November after copper declined on concern that demand will slow in China and as the outlook for Europe’s economic growth worsened.
The sol weakened to 2.6530 per U.S. dollar today, pushing its decline to 0.5 percent from 2.6410 on May 4, according to Deutsche Bank AG’s local unit. That’s the currency’s biggest decline since the period ending Nov. 25. The sol depreciated 0.1 percent today.
Copper, Peru’s top export, declined for a second week after industrial output in China increased 9.3 percent in April from a year earlier, lower than the 12.2 percent median estimate of 32 economists surveyed by Bloomberg. Europe’s economy will fail to grow this year with risks to the outlook “tilted to the downside” after nations from Spain to Italy slipped into recession, the European Commission said.
“If we were to see a further deterioration in Europe then we’ll continue to see the dollar perform a bit better against Peru’s sol,” said Mike Moran, a currency strategist at Standard Chartered Bank in New York. “Reduced expectations for copper” are likely damping demand for soles, he said.
The yield on Peru’s benchmark 7.84 percent sol-denominated bond due August 2020 climbed 12 basis points, or 0.12 percentage point, this week to 5.13 percent, according to prices compiled by Bloomberg. The price fell 0.88 centimo from a week ago to 117.96 centimos per sol. The yield rose one basis point today.
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