Colombia’s peso fell the most in a month after President Juan Manuel Santos challenged the Central Bank to take steps to ease a rally that drove the local currency to a two-year high.
Santos said he’d meet with policy makers today and urged the central bank’s board in a speech yesterday to be “more creative, more bold” in stemming gains in the peso.
The peso fell 0.7% to 1,813.15 per U.S. dollar at 12PM New York time, from 1,801.20 yesterday. That’s the biggest decline since July 7. The peso climbed to 1,797.35 earlier today, the strongest level since Aug. 8, 2008, and has rallied 13% this year, the best performance among world currencies tracked by Bloomberg.
A peso stronger that 1,800 per dollar “increases the risk of the Central Bank intervening in the market,” said Daniel Velandia, head analyst at Bogota-based brokerage Correval SA. “Exporters have been increasingly vocal and with Santos pushing for measures, we may see some kind of announcement.”
The Association of Colombian Flower Exporters in a July 30 statement titled “Flower Growers Ask Where Is Banco de la Republica” asked the Central Bank to intervene in the currency market to avoid the loss of “hundreds” of jobs as the strengthening peso cuts exporter revenue. The Colombian Agriculture Society said in a statement yesterday that the peso’s rally causes “high unemployment and ruin in the Colombian countryside,” and asked the government to help “save” farmers.
Banco de la Republica purchased $20 million a day between March 3 and June 30 to curb a rally policy makers said left the peso “misaligned.” Central bank chief Jose Dario Uribe said last month that policy makers haven’t ruled out “intervening in the market again.”
Velandia forecasts the central bank will announce daily dollar purchases to ease gains in the peso.
The yield on the benchmark 11% bonds due 2020 rose one basis point, or 0.01 percentage point, to 7.31%, according to Colombia’s stock exchange. The bond’s price declined 0.086 centavo to 125.438 centavos per peso. (Andrea Jaramillo / Bloomberg)