Colombia Peso Drops to 6-Month Low on Global Growth Concern
Colombia’s peso dropped to its lowest level in almost six months as concern global growth is slowing hurt appetite for higher-yielding, emerging-market assets.
The peso plunged 0.8 percent to 1,874 per U.S. dollar at 2:44 p.m. New York time, from 1,860 yesterday. Earlier it touched 1,889.90, its weakest intraday level since March 29.
“There’s a lot of distrust on what policy makers can do to improve things,” said Po Jeng, a currency analyst at Interbolsa SA, Colombia’s biggest brokerage. “Until now measures taken by the Federal Reserve don’t seem to have worked.”
The Fed today announced plans to buy $400 billion of long- term debt and said there are “significant downside risks” to the economic outlook.
RBC Capital Markets said in a report today it got out of bets placed in June that the Colombian peso would strengthen towards 1,680, after the currency weakened beyond 1,850.
Emerging-market currencies including the Colombian peso, the Chilean peso and the Czech koruna had been “resilient to building external stresses” as they were perceived as “safer haven currencies,” RBC wrote in the report.
“This has changed most recently, likely reflecting accelerated profit-taking of these positions to cover for losses elsewhere,” RBC wrote. “We still like the Colombian peso from a medium/long-term perspective, but would wait until global sentiment stabilizes” before betting on gains in the peso against the U.S. dollar.
The yield on Colombia’s 10 percent bonds due in July 2024 rose 13 basis points, or 0.13 percentage point, to 7.48 percent. The bond’s price fell 1.209 centavos to 120.296 centavos per peso.
The Finance Ministry yesterday repurchased 6.4 trillion pesos ($3.4 billion) of peso bonds, known as TES, and in return offered securities due October 2015, October 2018 and a new 7.5 percent bond due August 2026.
Colombia will auction 18.6 trillion pesos of TES next year, 1.4 trillion pesos less than initially planned, after the debt swap reduced financing needs, Finance Minister Juan Carlos Echeverry told reporters yesterday in Bogota.
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