Bloomberg News

Colombia Peso Heads for Weekly Plunge as Cardenas Says Job Done

June 21, 2013

Colombia’s peso was headed for its biggest weekly drop since May 2012, prompting Finance Minister Mauricio Cardenas to say yesterday that the government may wind down its foreign-exchange intervention.

The currency fell 0.2 percent to 1,942.70 per U.S. dollar at 11:44 a.m in Bogota, the weakest level on a closing basis since December 2011. The peso extended its weekly drop to 3.1 percent after the Federal Reserve said on June 19 that it may wind down a stimulus program that has boosted emerging-market assets. The peso has fallen 9.1 percent this year, the biggest decline after the South African rand and Brazilian real among 24 emerging-market dollar counterparts tracked by Bloomberg.

Cardenas said yesterday in Bogota that “‘we already have done our job’’ as the peso plunged toward 1,950, which he has called the ‘‘equilibrium rate.’’ U.S. Treasury 10-year note yields rose today to their highest since August 2011 after Fed Chairman Ben S. Bernanke said this week that policy makers may end $85 billion in monthly bond purchases under quantitative easing in mid-2014.

‘‘You had big inflows into emerging markets because of quantitative easing,’’ Bernd Berg, an emerging-market strategist at Credit Suisse Group AG in Zurich, said in a telephone interview. ‘‘Now you have yields rising in the U.S.’’

Berg said the Colombian peso may weaken to 2,000 by the end of the third quarter, compared with a previous forecast of 1,780. He predicts the peso may trade at 1,970 in a year, weaker than a previously forecast 1,835.

Yields on benchmark Colombian peso bonds due in July 2024 climbed seven basis points to 6.97 percent today and have increased 60 basis points this week, according to the stock exchange. Yesterday they jumped 31 basis points, closing at their highest level since July 2012.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

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


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