Colombia’s currency was 1.1% weaker against the dollar on Tuesday at 1,972 pesos as investors start betting on an expected end-of-year slump in the peso that would bring it to the psychological COP2,000 mark.
“Traders in the forex market are buying dollars because they’re focused on reaching the COP2,000 level,” said Juan Pablo Vieira, a currency analyst at Colombia’s biggest brokerage InterBolsa.
The weakness in the peso comes even as other currencies in the region, such as the Brazilian real and the Mexican peso, notch modest gains, fueled by improved risk sentiment as U.S. stocks trade in positive territory.
The peso closed slightly stronger Monday at COP1,950.25. But a general consensus in the forex market is of the view that December will bring peso weakness in the same way it did last year, especially if the European debt crisis worsens.
Colombia’s peso last year weakened about 5% during the week between Christmas and New Year’s, which put it above COP2,000 for the first time since May 2010. Analysts say there’s often a shortage of dollars for Colombia’s corporate sector in December, which leads to peso weakness.
Vieira said that while he agrees with the market view that the peso could weaken to COP2,000 by the end of the year, he said he doesn’t expect the currency to weaken much further Tuesday.
“The news for the peso is actually good today,” he said. “Oil prices in international markets are up, U.S. consumer confidence is up, and Venezuela and Colombia just agreed to increase trade ties. I think we could see a modest rebound in the peso as the session moves along.”
