Peru’s sol posted its steepest decline this month after the central bank boosted dollar purchases to curb gains in Latin America’s best performing currency of the past year.
The sol fell 0.2 percent to 2.5735 per U.S. dollar at today’s close for the biggest decline since Jan. 31, according to prices compiled by Bloomberg. The central bank said on its website it bought $210 million of U.S. currency today, taking total purchases this year to $3.3 billion.
The central bank is buying “significant” amounts of greenbacks as “dollar flows are still very strong,” said Gonzalo Navarro, the head trader at Banco Santander Peru SA.
The monetary authority has increased purchases and raised reserve requirements to curb dollar supply. Foreign-currency inflows have risen amid increased demand for the Andean nation’s bonds and as Peruvian companies seek financing abroad.
Demand for soles usually increases in the first quarter before an April 2 deadline for companies’ annual income tax payments.
The sol appreciated 0.2 percent this week and its 4.3 percent gain in the past year is the strongest among the six most-traded Latin American currencies tracked by Bloomberg.
Peru’s economy grew at the slowest pace in three years in December as construction activity eased. Economic activity rose 4.3 percent, the government’s statistics agency said in a report issued today in Lima. The median forecast of 12 analysts surveyed by Bloomberg was for a 6 percent increase.
The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell three basis points, or 0.03 percentage point, to 3.75 percent at 2:43 p.m. in Lima, according to prices compiled by Bloomberg. The price climbed 0.18 centimo to 126.32 centimos per sol.
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