Colombia’s peso plunged to its lowest
since July 2006, leading declines in Latin American currencies,
as concern international financial institutions will face further
losses amid a deepening recession cut into demand for higher-
yielding assets.
The peso dropped as much as 2.7 percent amid a decline in
oil, Colombia’s biggest export. Demand for emerging-market assets
also waned as stocks in Europe and Asia fell and U.S. equity-
index futures slumped.
“Markets are dropping worldwide as data shows economies
continue to deteriorate,” said Julian Cardenas, an analyst at
Bogota-based brokerage Corredores Asociados.
Colombia’s peso slid the most since Oct. 22, weakening 2.5
percent to 2,562 per dollar at 2:54 p.m. New York time, from
2,498.5 on Feb. 13, according to the Colombian foreign-exchange
electronic transactions system, known as SET-FX. It earlier
touched 2,565.95.
Because of the U.S. holiday yesterday, Colombia’s currency
and bonds traded in the so-called next-day market, in which
payment and delivery are made the following trading day.
Energy Minister Hernan Martinez’s announcement yesterday
that state oil company Ecopetrol SA will buy back a 51 percent
stake of its Cartagena refinery from Glencore International AG,
is also fueling declines in the currency, according to Cardenas.
“The perception investment is leaving instead of coming
into Colombia is leading to expectations the peso will drop
further,” he said.
The peso’s decline may lead the central bank to ease the
pace of interest-rate cuts, Cardenas said.
“Although the economy needs it, the bank may hold off
cutting rates this month as the strong devaluation fuels
inflation,” said Cardenas.
Banco de la Republica in January lowered its overnight
lending rate by half a percentage point for a second straight
month, to 9 percent. Policy makers next meet on Feb. 27.
The yield on Colombia’s 11 percent bonds due in July 2020
rose five basis points, or 0.05 percentage point, to 9.92
percent, according to Colombia’s stock exchange. The bond’s price
fell 0.366 centavo to 107.072 centavos per peso.
Crude oil for March delivery fell by as much as 8.2 percent
to $34.45 a barrel on the New York Mercantile Exchange. Prices
are down 76 percent from a record high in July.
The plunge in oil has also pushed Venezuela’s bolivar lower.
The South American nation gets more than 90 percent of its
exports from the crude. (Bloomberg)