Colombia’s peso weakened 1.7 percent on Tuesday as the U.S. dollar rallied around the world and the local market braced itself for the start of a series of dollar purchases that the central bank announced on Friday.
The local currency fell to 1,983 per dollar amid uncertainty about when the bank will start intervening and how much of its reserves it is willing to spend in its campaign to control the peso’s strength.
“The lack of clarity obviously has people wondering,” one local foreign-exchange trader said.
The bank on Friday said it plans to spend $1.5 billion by the end of the year on dollar purchases and buybacks of local TES treasury paper. But it did not provide a breakdown of how much would be spent on interventions versus buybacks.
The peso has rallied 19 percent against the dollar over the last 12 months, sparking howls from Colombian exporters who have been receiving rapidly weakening greenbacks for their international sales while paying costs in pesos.
Farmers and manufacturers are putting pressure on policymakers to do something about the strong local currency. Economists expect the peso to continue its strengthening trend despite the central bank’s intervention policy.
The dollar meanwhile rose to a two-week high against the euro on Tuesday after a report showing U.S. consumer confidence deteriorated sharply in October boosted the greenback’s safe-haven appeal.
“The exchange rate in Colombia reacted mainly to the strength of the dollar in international markets,” said analyst Julian Cardenas of Bogota-based brokerage Corredores Asociados. (Reuters)