Bloomberg News

Colombia Peso Falls as Factory, Retail Data Buoy Rate-Cut Wagers

July 23, 2012

Colombia’s peso fell the most in a month as waning industrial production and retail sales buoyed speculation the central bank may cut rates.

The peso fell 0.6 percent to 1,791.50 per dollar at 10:09 a.m. in Bogota after falling as much as 0.9 percent, the biggest intraday drop since June 25. The peso has rallied 8.2 percent this year, the best performance among all currencies tracked by Bloomberg. Colombia’s markets were closed July 20.

Industrial output fell for a third straight month in May on an annual basis and retail sales rose 0.9 percent, missing the 3.5 percent median estimate among economists surveyed by Bloomberg, the national statistics agency said July 19.

“After the latest economic data the market may be looking for a rate cut in the coming months,” said Daniel Velandia, the head analyst at Correval SA brokerage in Bogota. “There’s also the possibility the bank may step up dollar purchases, and meanwhile there’s a difficult international context especially as oil prices drop.”

The central bank should consider cutting interest rates after recent data show the economy losing speed, President Juan Manuel Santos said in a July 20 speech.

“I have asked the central bank to study a cut in interest rates, and evaluate a more aggressive purchase of dollars to increase our international reserves,” Santos said. “This will also help us confront the phenomenon of revaluation.”

Borrowing Costs

The central bank held the overnight lending rate at 5.25 percent for a fourth straight month on June 29. Policy makers will lower the target to 5 percent at the July 27 meeting, according to six of 20 economists surveyed by Bloomberg. The rest said the benchmark will hold steady.

Oil, the nation’s biggest export, plunged on concern that Europe’s sovereign-debt crisis is deepening and as a Chinese central-bank adviser said the country’s economic expansion may slow further. Crude oil for September delivery fell 3 percent to $89.06 a barrel in New York.

The yield on benchmark 10 percent peso-denominated debt due in July 2024 fell three basis points, or 0.03 percentage point, to 6.76 percent according to the central bank. The price increased 0.233 centavo to 126.031 centavos per peso.

To contact the reporter on this story: Christine Jenkins in Bogota at cjenkins28@bloomberg.net

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


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