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Colombia News | Colombia Reports
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Economy

Peso falls to 28-month low

by Adriaan Alsema January 30, 2009

Colombia’s peso slid to its weakest
since September 2006 as expectations that the central bank will lower
interest rates today undermined demand for the currency. 

The currency slid 0.8 percent to 2,411.8 per dollar at 9:49
a.m. New York time from 2,393 yesterday, according to the
Colombian foreign-exchange electronic transactions system, known
as SET-FX. It touched 2,425, the weakest since Sept. 22, 2006.

The currency is down 6.8 percent this month, its biggest
decline since October 2008.

“The market is anticipating a cut of 50 to 100 basis points
and that has increased demand for dollars in the last few
weeks,” said Adriana Botero, an analyst with Acciones y Valores,
a Bogota-based brokerage.

Policy makers will lower Colombia’s overnight lending rate
by 50 basis points to 9 percent later today, according to the
median forecast of 39 economists surveyed by Bloomberg News. The
central bank reduced rates by half a percentage point on Dec. 19,
the first cut in three years.

“A 50-basis-point cut has already been priced in, so a 100-
basis-point cut would likely generate more movement,” Botero
said.

The yield on Colombia’s 11 percent bonds due in July 2020
dropped eight basis points, or 0.08 percentage point, to 9.67
percent, its lowest since June 2007, according to Colombia’s
stock exchange. (Bloomberg)

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