The Colombian peso appreciated Wednesday to its strongest level in more than a month as market players speculated the government has started to sell dollars, while the Central Bank has stopped buying them.
The peso strengthened to 1,974 against the dollar from COP1,988.4 on Tuesday, its highest level since since Nov. 25.
“There is market speculation that the government is selling dollars,” said Daniel Velandia, a market analyst with local brokerage Ultrabursatiles.
In October, Finance Minister Oscar Ivan Zuluaga said the government wouldn’t sell dollars until the end of 2009.
The government has a large amount of dollars in its vaults from bond sales on the international markets and will require pesos to pay its bills later this year, Velandia said.
The Colombian Central Bank stopped buying dollars on the spot market after buying an undisclosed amount in late 2009 in a bid to stem the peso’s appreciation. As a result, investors expect to see peso appreciation over the coming weeks. Felipe Munoz, who manages a fund of government dollar bonds with local brokerage Corredores Asociados, said the peso may strengthen to COP1,850.
In the debt market, the yield on the benchmark government peso-denominated bond maturing in 2020 rose to 8.634% up from 8.434% on Tuesday.
Colombia’s benchmark IGBC stock index closed at 11,665.91 points, almost unchanged from Tuesday’s level.
The most traded stock was the preferred shares of the country’s largest bank, Bancolombia SA, which fell 0.9% to COP22,800.
Santiago Castro, a market analyst with local brokerage Correval, said the share price followed the price of the bank’s New York-traded share, which fell 1.4% to US$45.80. (Inti Landauro / Dow Jones)