Colombian peso strengthens 1% against dollar to COP1,798

The Colombian peso is strengthening 1% against the dollar Thursday, adding to the sharp gains by the currency in January, as investors and traders respond to the Federal Reserve’s signals that it will keep U.S. interest rates near zero until 2014.

The peso gained to COP1,798 to the dollar from COP1,815.75 a day earlier, according to central bank data. Foreign exchange trading was closed Wednesday when the Federal Reserved signaled that it would keep rates near zero until 2014, so the market Thursday was catching up to the Fed’s statement.

“This is exclusively a response to the Fed’s statement,” said Camilo Perez, head of economic research at Banco de Bogota. “We are expecting a weak dollar for the years to come,” he added.

Before Thursday’s gains, the peso had already appreciated nearly 7% against the dollar in January. A surge in foreign investment geared at Colombia’s booming oil and mining sector is considered by analysts as the main reason for the peso’s strength.

Colombian exporters, which are seeing the peso’s surge make their products less competitive overseas, are demanding that the government take forceful measures to curb the peso’s strength.

Some business groups are demanding that the government impose capital controls, which limit foreign investment, to curb the peso’s strength. The government in the past, however, has steered away from placing limits on foreign investment.

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