Peru’s sol posted its biggest two-day gain in almost eight months as speculation the Federal Reserve will take steps to bolster the U.S. economy spurred demand for higher-yielding, emerging-market assets.
The sol appreciated 0.4 percent to 2.685 per U.S. dollar at the close, extending its gain over today and yesterday to 0.7 percent, the most since the two days ended Oct. 10, according to Deutsche Bank AG’s local unit.
“There’s a higher probability the Fed will announce a third round of quantitative easing or an extension of Operation Twist because it continues to be a fragile recovery,” said Roberto Flores, the head of research at Inteligo SAB, a Lima- based brokerage.
Atlanta Fed President Dennis Lockhart said extending Operation Twist is an “option on the table.” European Central Bank President Mario Draghi said officials stand ready to act as the euro region’s growth outlook worsens.
The Fed started Operation Twist in September to reduce longer-term interest rates without expanding its balance sheet after two rounds of debt purchases known as quantitative easing.
Peru’s central bank didn’t buy or sell dollars in the spot market today. The bank, which has purchased $8 billion this year to stem gains in the sol, sold $676 million last month as the currency weakened 2.7 percent. It may resume dollar purchases if the sol extends its rally beyond 2.65, Flores said.
The yield on the benchmark 7.84 percent sol-denominated government bond due in August 2020 fell five basis points, or 0.05 percentage point, to 5.21 percent, according to data compiled by Bloomberg. The security’s price rose 0.31 centimo to 117.22 centimos per sol.
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