Colombia’s peso fell to the weakest in almost three months after the central bank stepped up its daily dollar purchases to stem the local currency’s rally.
The peso depreciated 0.2 percent to 1,831.60 per U.S. dollar at 11:41 a.m. in Bogota. Earlier it touched 1,838, the weakest since June 1. Today’s drop pared this year’s rally to 5.7 percent, still the best performance after the Hungarian forint and Chilean peso among all currencies tracked by Bloomberg.
Colombia’s central bank yesterday bought $35 million in the spot market, up from the minimum of $20 million a day the bank has said it will buy until at least Nov. 2. On Aug. 24 Banco de la Republica said it will step up its dollar purchases to $700 million by the end of September, or an average of $28 million a day. The Treasury began its own program of foreign currency intervention this month to help exporters.
“The market is seeing coordinated efforts between the central bank and the government to weaken the peso,” said Francisco Chaves, a strategist at brokerage Corredores Asociados in Bogota. “That should keep the peso trading around these levels, at least while both parties continue to intervene.”
The Treasury will continue to buy dollars this week to weaken the peso, outgoing Finance Minister Juan Carlos Echeverry said Aug. 23. While declining to specify the total amount the Treasury would purchase, he said it would buy $200 million last week on top of the $300 million bought earlier. Colombia’s bank deposit-guarantee fund, known as Fogafin, bought $200 million over the past few weeks, Echeverry also said last week.
‘Complementary’ Dollar Purchases
Echeverry, who resigned last week citing personal reasons, is being replaced by Mauricio Cardenas, an economist trained at the University of California at Berkeley who currently serves as mines and energy minister.
The Treasury’s dollar purchases are “complementary” to the central bank’s, bank chief Jose Dario Uribe told reporters in Bogota yesterday. “These are precisely the type of actions that are useful if there is concern over the exchange rate,” he said.
The yield on Colombia’s 10 percent peso-denominated debt due in July 2024 rose two basis points, or 0.02 percentage point, to 6.64 percent, according to the central bank.
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