The Colombian peso weakened to COP1,969 against the dollar Tuesday, from COP1,959.90 on Monday, as fears that China’s economy could slow increased risk aversion and lifted the U.S. currency.
Following a sharp rally in the first days of January, the peso has traded in a narrow band of COP1,958 to COP1,975.75 against the dollar since January 6.
“We had an artificial rate at the end of the year,” said Daniel Lozano, a market analyst with local brokerage Profesionales de Bolsa.
“Traders avoided taking short positions because of the credible threat from the [Colombia] Central Bank that they could come out and buy dollars. But once the Bank said they hadn’t bought any [dollars], the market reacted aggressively, and once the overshooting adjusted we got to where we are now,” Lozano added.
The yield on peso-denominated government bonds maturing in 2020 rose to 8.759% from 8.548% on Monday, ahead of Friday’s Central Bank board meeting.
All ten analysts who took part in a Dow Jones survey said the Bank is likely to leave its key lending rate unchanged at 3.5%.
“I don’t think anyone in the market thinks that there will be a change in interest rates,” Lozano said. “But we think the bank’s statement could give a signal of how monetary policy could shape up in the short and medium term, which could affect bond prices.”
The benchmark IGBC stock index rose 0.85% to 11478.91 points, while the Colcap index, which includes the largest firms by market capitalization, gained 0.93% to 1357 points.
Shares in Toronto-listed oil firm Pacific Rubiales rose 3.9% following its announcement on Monday that it had made an additional discovery at its Quifa block in Meta province.
“The market [Monday] found a good support level, and this news gave a fundamental reason to propel the stock even further,” said Jairo Lastra, a market analyst with local brokerage Proyectar Valores SA.
Although the news came out Monday, it continued to move the share price Tuesday, Lastra added. (Matthew Bristow / Dow Jones)