Colombian Peso Falls to One-Week Low on Bets for More Government Measures

Colombia’s peso fell to a one-week low on speculation the government will take additional measures to ease the currency’s world-beating rally as President Juan Manuel Santos meets today to discuss options to stem its gains.

The peso earlier fell to as low as 1,794.30, its weakest level since Oct. 6. The currency closed little changed at 1,790.68 per dollar, from 1,789.93 yesterday. It’s up 14.1 percent this year, the best performance among all currencies tracked by Bloomberg.

Santos will meet with government and central bank officials today to analyze options to ease the peso’s rally, Finance Minister Juan Carlos Echeverry said yesterday. Santos said in an Oct. 9 speech he also invited former Argentine economy minister Domingo Cavallo and ex-Peruvian prime minister Pedro Pablo Kuczynski to offer advice and that the government “is very conscious of the harm” the peso’s rally is causing. The meeting is scheduled to start at 5 p.m. New York time, according to the presidency’s website.

“The market is speculating more measures will be announced” by the time the central bank’s monetary policy meeting is held on Oct. 29, said David Aldana, head analyst at Bogota-based brokerage Ultrabursatiles SA. “Exporters have been voicing concern, and the government likely wants to show it is doing all it can.”

Colombia’s central bank said Sept. 15 it will buy a minimum of $20 million daily for at least four months, heeding a call from Santos who asked policy makers in August to take “bold and creative” action to ease the peso’s rally. Banco de la Republica said earlier this week it bought $240 million in the currency market last month.

Capital Controls

A group of Colombian business associations including ANDI, the country’s biggest, asked the government and central bank to take further measures to ease the peso’s rally which “has reached a point where it jeopardizes the Colombian economy’s positive outlook,” according to a copy of the letter sent by e- mail earlier this week.

Among the measures, the business groups ask that officials impose capital controls and increase dollar purchases in the currency market.

Officials may seek to impose limits on short-term portfolio investments as well as borrowing abroad, according to Aldana.

“Inflows have been rising and imposing capital controls has become a global trend,” said Aldana.

TES Auction

The yield on the nation’s benchmark 11 percent bonds due 2020 fell two basis points, or 0.02 percentage point, to 7.01 percent, according to Colombia’s stock exchange. The bond’s price rose 0.182 centavo to 127.493 centavos per peso.

Colombia’s borrowing costs declined at a government auction of fixed-rated securities, known as TES.

The yield on Colombia’s bonds due July 2024 fell to 7.37 percent, from 7.64 percent at the last auction on Sept. 22, the Finance Ministry said in a statement. The yield on the June 2016 bonds fell to 6.50 percent from 6.84 percent.

The ministry also sold securities due April 2013 to yield 4.98 percent. Colombia had last sold the bonds on April 28.

Demand for the fixed-rate securities sold today equaled 1.03 trillion pesos ($575.2 million), almost three times the 350 billion pesos of debt offered.

The reopening of the April 2013 bonds helped gains in the benchmark 2020 securities, according to Daniel Lozano, an analyst at Medellin-based brokerage Serfinco SA.

“The reopening reduces the issuance burden on the longer part of the curve,” said Lozano.

Colombian economists lowered their 2010 year-end inflation forecast to 2.74 percent, according to a central bank survey published today. That’s down from a median estimate of 2.97 percent in a survey last month. The central bank targets inflation this year between 2 percent and 4 percent.

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

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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