Bloomberg News

Central Bank Sells Most Dollars in Year to Boost Sol: Lima Mover

May 30, 2012

Peru’s central bank sold the most dollars in a year as concern the euro zone’s fiscal crisis is deepening curbed demand for soles.

Banco Central de Reserva del Peru sold $282 million in the spot market, the biggest sale since April 27 last year, when it sold $492 million. The central bank also issued 200 million soles ($74 million) in dollar-indexed certificates of deposit.

The central bank sold dollars last week for the first time in seven months, dipping into a record $58 billion of international reserves to stem a 2.4 percent slide in the sol this month. The euro-zone crisis and domestic social unrest have dimmed Peru’s growth outlook, central bank President Julio Velarde said yesterday. The bank intervenes in the spot market to keep the sol near its “fundamental” value, he said.

“There’s a lot of demand from foreigners in response to the drop in global markets,” said Gonzalo Navarro, head trader at Banco Santander in Lima. Investors in the forwards market are betting the sol will weaken “in the coming days,” he said.

The sol fell 0.2 percent to 2.7050 per U.S. dollar at today’s close, according to Deutsche Bank AG’s local unit. The currency touched 2.7065 on May 28, a six-month low.

U.S. and European stocks dropped today and the euro weakened after Italy failed to meet its maximum target at a debt sale and costs to protect Spanish government debt with default swaps climbed to a record while a Greek poll showed support for anti-austerity parties.

Peru declared a state of emergency in the southern Andean community of Espinar May 28 after community protests against Xstrata Plc’s (XTA) Tintaya copper mine led to four deaths.

The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 rose three basis points, or 0.03 percentage point, to 5.29 percent, according to prices compiled by Bloomberg. The price fell 0.21 centimo to 116.70 centimos per sol.

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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