Nov. 4 (Bloomberg) -- Colombia’s peso rose to its strongest level in a week as gains in oil, the country’s biggest export, and global stocks sparked demand for emerging-market assets.

The currency climbed 1.3 percent to 1,961.5 per U.S. dollar at 3:26 p.m. New York time, from 1,987.10 yesterday. It earlier touched its strongest level since Oct. 27. Today’s gain pares the peso’s decline in the past month to 2 percent, the worst performance against the dollar among 26 emerging-market currencies tracked by Bloomberg.

Oil rose 1.3 percent, its third straight day of gains. The Standard & Poor’s 500 Index added 1.1 percent and stocks in Latin America, Europe and Asia climbed. Colombia’s peso is also “settling down” after concern about the measures the government would take to stem the currency’s gain this year sparked losses, according to David Duarte, a Latin America analyst at 4Cast Inc. in New York.

“The market is pricing in the actual measures, taking away the premium on the uncertainty of the intervention,” Duarte said. “Gains in external markets are helping reinforce that move.” He forecasts the peso will “settle” around 1,930 by the end of next week.

The central bank said Oct. 23 that it will spend as much as 3 trillion pesos ($1.5 billion) through the end of the year to buy U.S. dollars and government peso bonds to inject cash into the financial system. Colombia’s government on Oct. 15 said it will refrain from selling dollars in the market for the rest of the year after expectations of higher dollar inflows helped push the currency to its strongest since August 2008.

Bond Yields

The yield on Colombia’s 11 percent bonds due in July 2020 fell five basis points, or 0.05 percentage point, to 8.27 percent, according to Colombia’s stock exchange. It has dropped 32 basis points since Banco de la Republica said it would buy peso bonds.

“It’s a huge difference in supply with the central bank’s intervention and the yield curve has been shifting down for that reason,” Duarte said. The central bank “is likely targeting longer maturities to give the market permanent liquidity,” he said.

Speculation inflation will remain within the central bank’s long-term target of 2 percent to 4 percent is also spurring demand for the securities, according to Duarte.

Chile, Argentina

Colombia’s annual inflation slowed to 2.95 percent in October from 3.21 percent in September, according to the median estimate of 19 economists in a Bloomberg News survey. The national statistics agency is scheduled to release the inflation report tomorrow.

In Chile, the peso advanced 0.6 percent to 528.05 per dollar, from 531.10 yesterday. The yield for a basket of the country’s 10-year peso bonds in inflation-linked currency units, called unidades de fomento, rose one basis point to 3.14 percent, according to Bloomberg composite prices.

Argentina’s peso was little changed at 3.8155 per dollar from 3.8149 yesterday. The yield on the country’s inflation- linked peso bonds due in 2033 fell 15 basis points to 11.45 percent, according to Citigroup Inc.’s local unit.

Venezuela’s bolivar climbed 2.1 percent to 5.63 per dollar in unregulated parallel market trading from 5.75 yesterday, traders said. Venezuelans buy dollars in the parallel market when they can’t get government authorization to purchase them at the official exchange rate of 2.15 per dollar.

Peru’s sol rose 0.3 percent to 2.9007 per dollar, from 2.91 yesterday. The yield on Peru’s 8.6 percent sol-denominated bond due August 2017 climbed five basis points to 4.94 percent, according to Citigroup Inc.’s local unit.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.netDrew Benson in Buenos Aires at abenson9@bloomberg.net

Last Updated: November 4, 2009 15:35 EST