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Colombia's Peso Rises to Strongest Level in a Month After Moody's Upgrade
Colombia’s peso rose to its strongest level in a month after Moody’s Investors Service raised the South American country’s credit rating outlook.
The currency jumped as much as 0.4 percent after the announcement, before retreating to 1,804.32 per dollar at 2:42 p.m. New York time, little changed from 1,804.9 yesterday. The peso’s 13.3 percent rally this year is the best performance among all currencies tracked by Bloomberg.
Colombia’s credit rating outlook was raised to positive from stable by Moody’s, citing the government’s push to cut debt and “favorable” oil production expectations, according to a statement on the company’s newswire. Moody’s rates Colombian foreign debt Ba1, one level below investment grade.
“Proposed legislation aimed at addressing some of Colombia’s structural fiscal issues has improved the prospects for further debt reduction in coming years,” Moody’s analyst Alessandra Alecci said in a statement on the company’s newswire.
Today’s announcement doesn’t apply to Colombia’s local- currency debt, which it grades one level higher at Baa3, Moody’s said.
Improved jobs data in the U.S. also helped boost the peso as lower jobless claims in the world’s biggest economy eases demand for the dollar as a refuge asset and increases confidence in emerging markets, said Pablo Gonzalez, a currency trader at Medellin-based brokerage Bolsa y Renta SA.
‘Appetite for Risk’
“The jobless claims data was better than expected” which is “injecting optimism into the market and boosting the value of the peso,” Gonzalez said today in a telephone interview. “Emerging markets are being favored because people have more appetite for risk.”
U.S. jobless claims dropped more than forecast, falling by 27,000 to 451,000 in the week ended Sept. 4, the U.S. Labor Department reported today.
Expectations the country’s central bank will intervene in the spot market to limit the peso’s world-beating rally are tempering the “generalized optimism” in the country’s economy, Correval SA analysts including Daniel Velandia wrote today in a note to clients.
“The market seems to be comfortable with the peso trading around 1,800, while the expectations of a central bank intervention increase as the spot price drops below 1,800,” said Velandia, head analyst at the Bogota-based brokerage.
‘Appropriate’
Central bank chief Jose Dario Uribe said Aug. 20 that the bank will buy dollars in the spot market to ease gains in the peso when “appropriate.”
The yield on the benchmark 11 percent bonds due 2020 rose one basis point, or 0.01 percentage point, to 7.32 percent, according to Colombia’s stock exchange. The bond’s price fell 0.118 centavo to 125.238 centavos per peso.
The bond’s yield has risen 25 basis points this week after the national statistics agency reported Sept. 4 that annual inflation unexpectedly accelerated to 2.31 percent in August.
The increase in inflation and a Sept. 6 finance ministry announcement that the government would boost local debt sales in 2011 to 28 trillion pesos ($15.5 billion) is driving up yields as the market anticipates a greater supply of treasury bonds, Francisco Chaves, a fixed-income strategist at Bogota-based brokerage Corredores Asociados SA, said today in a telephone interview.
To contact the reporter on this story: Nathan Gill in Quito at ngill4@bloomberg.net
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