Colombia Peso Trades at 15-Month Low on Intervention Outlook

(Bloomberg) Colombia’s peso traded at a 15- month low on speculation the central bank will extend its plan to buy dollars as it seeks to ease gains in the local currency.

The peso depreciated less than 0.1 percent to 1,849.79 per U.S. dollar at 10:04 a.m. in Bogota, the weakest level on a closing basis since January 2012.

Banco de la Republica said Jan. 28 it will buy at least $30 million a day, bringing purchases in the foreign-exchange market to $3 billion from February to May. Policy makers will probably announce an extension to the dollar purchase program at their April 26 monetary policy meeting, according to Lucia Duarte, a foreign-exchange strategist at Bancolombia SA, the nation’s biggest bank.

“Next week’s Banrep meeting has the market nervous,” Duarte said in a telephone interview from Bogota. “Yesterday the exchange rate broke significant resistance levels, and given the global environment, lower foreign direct investment and the government’s verbal intervention,” the trend is for a weaker peso, she said.

The peso, which strengthened 9.7 percent in 2012, has slumped 4.5 percent this year. Resistance is a level where sell orders are clustered.

Declining prices of Colombia’s commodity exports will probably weaken the peso, central bank Governor Jose Dario Uribe said in an interview on Caracol Radio yesterday. Finance Minister Mauricio Cardenas has said he expects the currency to weaken to 1,900 and wants to “get there quickly.”
Pension Rules

Colombia announced on April 15 as part of an economic stimulus that it will adjust rules on risk and profitability governing pension funds to weaken the peso by encouraging them to invest more abroad. It also said a royalties fund controlled by the government known as Fonpet will buy $500 million this year to invest in assets abroad and keep another $500 million overseas rather than bringing the money back into Colombia.

Yields on Colombia’s peso bonds maturing in 2024 fell two basis points, or 0.02 percentage point, to 4.92 percent, according to the stock exchange.

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Source QColombia

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