Peru's Sol Falls From a Two-Year High on Europe Economic Recovery Concern

Peru’s sol fell from a two-year high on concern Europe’s debt crisis will worsen, threatening the global recovery and crimping the country’s copper exports.

The currency weakened 0.1 percent to 2.7960 per U.S. dollar at 2:48 p.m. New York time, from 2.7935 yesterday.

Copper fell in New York and the dollar rose after The Wall Street Journal reported European bank stress tests published in July understated sovereign debt holdings at some financial institutions. Copper also slid as a report showed an unexpected drop in factory orders in Germany.

A slower global recovery could curtail demand for copper, Peru’s top export, and cut metals prices, said Bertrand Delgado, an economist at Roubini Global Economics LLC in New York.

“Things are going to get progressively worse before they get better,” Delgado said. “People are wondering with the U.S., is it going to be a double dip recession?”

The central bank didn’t buy or sell dollars in the foreign exchange market today, it said on its website.

“Peru is in a privileged position because it has strong domestic demand, a sound financial system and high international reserves,” Delgado said.

The yield on Peru’s benchmark 8.6 percent sol-denominated bond due August 2017 was unchanged at 5.21 percent, according to Citigroup Inc.’s local unit.

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

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