Peruvian Sol Gains to a Two-Year High on Growth, Higher Interest Rates
Peru’s sol rose to a two-year high as the expanding economy and higher interest rates boosted appetite for the nation’s local assets.
The sol rose 0.2 percent to 2.8155 per U.S. dollar at 3:44 p.m. New York time, from 2.82 on July 30. That’s its strongest level on a closing basis since Aug. 7, 2008.
Peru’s central bank bought $95 million in the foreign- exchange market today to ease gains in the sol. It purchased $1.86 billion in July, the biggest monthly purchase since March 2008, and also increased reserve requirements to curb rising demand for the local currency.
“Growth remains solid and rates are expected to continue to rise, making Peru attractive,” said Bertrand Delgado, a senior economist at Roubini Global Economics LLC in New York. “The central bank has been intervening strongly and will likely continue to do so to protect the dollarized economy.”
South America’s sixth-largest economy expanded 9.2 percent in May from a year earlier, and may post growth of close to 10 percent in June, central bank President Julio Velarde said July 22. The statistics agency is scheduled to publish its June gross domestic product report on Aug. 16.
Policy makers will raise the overnight lending rate for a fourth straight month by a quarter percentage point to 2.25 percent when they next meet Aug. 5, according to 13 of 14 economists surveyed by Bloomberg News. One analyst expects Banco Central de Reserva del Peru to lift the key rate to 2.5 percent.
The yield on Peru’s benchmark 8.6 percent sol-denominated bond due August 2017 was little changed at 5.35 percent, according to Citigroup Inc.’s local unit.
To contact the reporter on this story: Andrea Jaramillo in Bogota at Ajaramillo1@bloomberg.net
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