Colombia's Peso Gains to Strongest Since October on Foreign Inflow Bets

Colombia’s peso rose to its strongest level since October on bets foreign investment flows will continue to push gains in the local currency.

The peso advanced 0.5 percent to 1,849.90 per U.S. dollar at 2:03 p.m. New York time, from 1,858.90 yesterday. That’s the strongest level on a closing basis since Oct. 16. The peso is up 10.5 percent this year, the best performance among world currencies tracked by Bloomberg.

The peso fell 0.3 percent on July 23, the only decline in the last seven trading days, on bets the central bank would announce in its monetary policy meeting that it would buy dollars in the spot market to ease gains in the local currency.

“People were expecting the central bank to announce that it would intervene in the market, and since that didn’t happen, investors are buying pesos on bets it will continue to strengthen,” said Camilo Perez, head analyst at Banco de Bogota SA, Colombia’s second-biggest bank.

Central bank chief Jose Dario Uribe told reporters after the July 23 meeting that Banco de la Republica “has never ruled out intervening in the market again.” The bank purchased $20 million a day between March 3 and June 30 to curb a rally policy makers said left the peso “misaligned.”

Foreign direct investment flows as well as increased foreign investment in Colombian financial assets and higher inflows from local companies taking loans abroad are driving gains in the peso, according to Perez.

The yield on Colombia’s benchmark 11 percent bonds due July 2020 rose eight basis points, or 0.08 percentage point, to 7.68 percent, according to Colombia’s stock exchange. The bond’s price fell 0.595 centavo to 122.625 centavos per peso.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

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