Colombian central bank chairman Jose Dario Uribe on Wednesday blamed the recent sharp appreciation of the peso in January on external factors, mainly a better economic outlook for the U.S.
“There’s a common factor in the recent appreciation of emerging market currencies and that is the external factor,” Uribe said in interview with local radio RCN. “There have been relatively good news in the U.S. and that has given investors some tranquility,” he added.
The peso has appreciated sharply since the start of the year, gaining 4% from the end of 2011.
Analysts have pointed to a strong domestic economic performance, with gross domestic product expanding a whopping 7.7% in the third quarter, along with a boom in foreign direct investment, as the main factors driving the peso’s surge.
Uribe, however, said that the main reason behind the peso’s recent strength has been external.
If the peso’s recent surge continues, it could represent a major economic challenge for the administration of President Juan Manuel Santos. Exporters in the past have called for the government to step in to limit the peso’s appreciation, which makes their products less competitive abroad.
The central bank last year intervened in the spot market by buying $20 million daily to absorb dollars in attempt to limit the peso’s volatility. That purchase program ended in September after the peso weakened sharply against the greenback, making the dollar acquisitions less necessary.
The central bank replaced it with a plan to buy or sell foreign-exchange options if the exchange rate moves more than 5% from a 20-day moving average. The bank hasn’t yet been forced to step in.