The Colombian peso appreciated for a fifth straight day on Friday, lifted by a belief that the Colombian government is selling dollars, and as worse-than-expected U.S. employment sent the greenback lower.
The peso firmed to COP1,963.50 to the dollar from COP1,971 on Thursday. On December 30, the last trading day of 2009, the peso was at COP2,043 against the dollar.
“I think it could reach COP1,950 early next week,” said Ricardo Perez, a market analyst at local brokerage Alianza Valores.
In October, Finance Minister Oscar Ivan Zuluaga had said the government and state-controlled oil company Ecopetrol SA would stop selling dollars until the end of 2009 to slow the peso’s appreciation. Many investors and analysts say they believe the government resumed its dollar sales this week, though Finance Ministry press officer Jose Triana refused to confirm this.
The Colombian Treasury sold the equivalent of US$2.5 billion in bonds on international markets in 2009, of which US$2 billion will be spent in 2010. Since most government spending is in pesos, the Treasury sells dollars for pesos on the foreign exchange market.
Perez of Alianza Valores said the Finance Ministry is selling dollars to redeem a peso-denominated bond that matures on February 12.
“The government has to buy back almost 4 trillion pesos of debt in February. As they were not able to sell [their 57.66% stake in power company] Isagen, they are selling dollars,” he said.
The Colombian Treasury had said it would sell its stake in Isagen SA during 2009, but it has postponed the sale until this year.
The U.S. Labor Department’s report Friday that U.S. non-farm payrolls fell by 85,000 in December also helped boost the peso and other emerging-market currencies, Perez said. Poor employment numbers in the U.S. reduce the likelihood of an early rise in interest rates by the Federal Reserve.
If the peso continues to appreciate, it could force the government to take action, said Julian Marquez, a market analyst at local holding company Coficolombiana SA.
“Right now they’ll be happy with the peso fluctuating 50 points either side of the 2,000 level to the dollar,” he said. “But if it strengthens to COP1,900 or COP1,850, there will be a lot of pressure from exporters, and it will become a political issue.”
In the debt markets, the yield on Colombia’s benchmark peso-denominated bond maturing in 2020 fell to 8.625% from 8.65% on Thursday.
Colombia’s benchmark IGBC stock index rose 0.5% to end at 11,647.21, led by a 1.2% gain in state-controlled oil company Ecopetrol. The Colcap index, which includes the largest companies by market capitalization, rose 0.4% to 1,374.72. (Matthew Bristow / Dow Jones)