(Bloomberg) Colombia’s central bank may step up dollar purchases as the South American country seeks to bolster its drive to weaken the peso, bank Governor Jose Dario Uribe said.
An increase in purchases from the current $40 million a day is a “possibility” Uribe said in a March 16 interview in Panama City, where he attended the Inter-American Development Bank’s annual meeting. The bank will buy close to $3.5 billion of greenbacks from Jan. 1 through May 31, after buying more than $4.8 billion last year, Uribe said.
The peso has fallen 2 percent this year as Colombia bought dollars and cut overseas debt sales after the strength of the peso, which has gained more than any other major Latin American currency since 2009, made coffee, flower and banana exports less competitive. President Juan Manuel Santos said March 14 he wants the central bank to be “more creative” in its efforts to limit peso gains.
“For the Colombian economy it would good and appropriate if the peso was a bit weaker,” Uribe said. Asked about increasing the scale of purchases, he said “it’s a possibility. For now, the decision is to keep accumulating” close to $40 million daily.
The peso has gained 13 percent since 2009, the most of the six most-traded Latin American currencies.
Finance Minister Mauricio Cardenas has said that the government will purchase $1 billion to service debt in addition to the $1 billion it will purchase for its oil-stability fund.
Colombia will continue to build foreign reserves, which have swollen to a record $38 billion, to reflect its larger current account and to protect the economy from a global slowdown, the 54-year-old Uribe said.
Policy makers on Feb. 22 reduced the benchmark lending rate a quarter point to 3.75 percent, the sixth cut in eight months, as the economy grows slower than its potential.
February’s annual inflation of 1.83 percent was the slowest in six decades. Inflation will accelerate while remaining below 3 percent this year, the mid-point of the central bank’s target range, Uribe said.
Yields on Colombia’s benchmark peso bonds due 2024 have fallen 1.01 percentage points in the past three months to 4.92 percent, according to data compiled by Bloomberg.