The peso cruised past the COP1,800 threshold on Friday as the currency continues to gain on the strong economic outlook for Colombia and the global weakness of the dollar.
The peso closed at COP1,798.4 per dollar on Friday, gaining from COP1,804 a day earlier. The currency has strengthened after Moody’s Investors Service raised Colombia’s credit-rating outlook. Colombia remains one level below investment grade, but many analysts say the improved outlook means that investment grade for the Andean nation is within sight.
The breach of the COP1,800 mark on Friday could push authorities to intervene in the currency market to rein in the peso’s appreciation. The Colombian currency ranks this year as one of the best-performing currencies in the world, pushing many exporters to complain that they are losing ground to rivals from other countries.
President Juan Manuel Santos has repeatedly asked the central bank to be “bold and more creative” in its efforts to curb the peso’s strength. The monetary authority, however, has stayed on the sidelines since June 30. In the first half of the year, the central bank purchased $1.6 billion in the spot market in a bid to curb the peso.
The central bank’s “stance could change” and “prompt authorities to adopt more forceful measures” if the exchange rate continues below the COP1,800 level, Alberto Ramos, an economist with Goldman Sachs, wrote in a research note.
The COP1,800 mark has been seen as the comfort level for authorities. “You could feel the tension in the market as this has become a level that people now identify as an export-problem level,” Andres Jimenez, a trader with Interbolsa SA, Colombia’s largest brokerage firm, wrote in a note.
The central bank has said it can intervene in the spot market when it considers it appropriate. The central bank’s directorate is slated to hold a monetary-policy meeting, where the exchange rate is also discussed, on Sept. 24.
Colombian stocks, meanwhile, dropped on profit-taking. The IGBC index declined 1.58% to 14147 points. The yield on the benchmark 2020 bond stood at 7.452% from 7.327% on Thursday. (Darcy Crowe / Dow Jones Newswires)