The US dollar broke through the COP3,500 barrier for the first time in history on Wednesday as Colombia’s peso continues to suffer from global economic insecurity.
The recent pressure on the value of Colombia’s peso is felt throughout Latin America; many countries have seen the price of their national currency drop.
The dollar’s spike to above the COP3,500 mark lasted only six minutes around 10AM. By noon, the value of the dollar seemed to have stabilized around COP3,498.
The effects of the trade war between the United States and China has been affecting the Colombian economy and its currency since the beginning.
Colombia’s exports are faltering and fears among investors that the country and the region could be heading towards a recession are growing, according to economic daily La Republica.
Oanda senior market analyst Alfonso Esparza via La Republica
Adding to the concerns caused by the trade war, foreign investors are reportedly nervous about the effects of the United Kingdom’s pending departure from the EU.
This has not just pulled investors away from the currencies of countries like Colombia, but has also boosted the price of gold, which is commonly considered a safe refuge in times of economic uncertainty.
The dropping value of the currency and its possible effects on the economy are a major headache for Colombia’s finance minister who is trying to push next year’s budget through congress.
If the uncertainty persist, which appears increasingly likely, the budget deficit could exceed the allowed maximum and force the government to improvise spending cuts or sell assets at an unfavorable price.