Colombian Finance Minister Oscar Ivan
Zuluaga said the peso’s decline matches that of other regional
currencies and the government will keep monitoring its value.
The peso’s “behavior is reflecting an adjustment to the
average devaluation in other Latin American countries,” Zuluaga
told reporters today at a conference in Bogota. “There’s an
active participation of offshore funds in the purchase of dollars
which corresponds to a recomposing of portfolios.”
The Colombian peso plunged 25 percent in the past 12 months
as the global credit crisis hurt appetite for higher-yielding,
emerging-market assets. In the same period, the Mexican peso
weakened 26 percent and the Brazilian real slid 22 percent.
Colombia’s peso slid 1.7 percent to 2,544 per dollar at
12:02 p.m. New York time, according to the Colombian foreign-
exchange electronic transactions system, known as SET-FX. It
earlier touched 2,549.49, its weakest level since July 2006. The
currency has plunged 12 percent in the past month, the biggest
decline among the six most-traded Latin American currencies.
Colombia will monitor the peso’s effect on inflation,
“We have to pay close attention in order to avoid this
increased devaluation affecting our inflation target,” Zuluaga
said. Colombia’s annual inflation slowed to 7.4 percent last
month. The central bank targets inflation this year between 4.5
percent and 5.5 percent.
Zuluaga, who is also president of the central bank’s board,
said the South American nation will continue to allow the
currency to float.
“The government has a solid cash position in dollars that
it will monetize as needs arise, but for the moment the policy
decision is to allow the currency to continue to float,” he
Earlier this week, the central bank said it sold $175
million in January through call options, in a bid to ease the
currency’s drop. The sale of the options is triggered when the
peso’s 20-day moving average changes by more than 5 percent. A
call grants the right to buy.
Banco de la Republica didn’t intervene directly in the
market last month. The central bank only comments on its
intervention in a monthly report. (Bloomberg)