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Economy

Peso weakens more, hitting worst level of 2010

by Newswires December 29, 2010

The Colombian peso hit its weakest level this year Tuesday as the central bank’s hefty purchases of dollars in low-liquidity holiday trading caused the greenback to soar.

The peso ended at COP2,037 to the dollar, the central bank said, marking the first time it has breached the COP2,000 level at the close in seven months. It is the peso’s weakest level against the greenback since Dec. 30, 2009, when it was at COP2,043.

Colombia’s peso had been among the strongest currencies in the region for most of 2010, causing headaches for Colombian exporters and eventually forcing the central bank to take action. In September, the bank announced it was starting daily purchases of at least $20 million to drain U.S. currency from the foreign-exchange market and weaken the peso.

The measure quickly served to stem the peso’s gains.

Then, the impact of the central bank’s daily $20 million purchases began to multiply as low-volume holiday trading kicked in. In recent days, the bank’s dollar purchases have been “essentially doing double the work” because of the holiday illiquidity, said Jose Fernando Restrepo, head of research at InterBolsa in Medellin.

Analysts say Colombia’s forex market has dropped in half during the past couple weeks, to about $550 million a day, from more than $1 billion during normal trading days.

Meanwhile, Colombian stocks retreated Tuesday after five straight sessions of gains, led by a decline in the market’s heavyweight, state-run oil firm Ecopetrol SA (ECOPETROL.BO).

The IGBC index of blue-chip stocks declined 0.91% to 15661 points. Shares of Ecopetrol SA (ECOPETROL.BO) shed 1.32% to COP4,115.

Pacific Rubiales Energy (PRE.T), which owns the largest oil field in Colombia, was among a handful of stocks in the index to see gains. Pacific’s shares rose 1.55% to COP64,300. (Dan Molinski / Dow Jones Newswires)

Colombia pesoeconomy

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