Colombia’s Peso Falls to Six-Week Low on U.S. Budget Cut Outlook

Colombia’s peso dropped to a six- week low as U.S. lawmakers’ failure to agree on budget cuts and growing concern that Europe’s debt crisis will worsen hurt appetite for higher-yielding, emerging-market assets.

The peso declined 0.7 percent to 1,928 per U.S. dollar at 9:46 a.m. Bogota time, from 1,914.42 on Nov. 18. Earlier it touched 1,929.45, its weakest level since Oct. 10.

“There’s a generalized decline in the local market as investors reduce their exposure to risk,” said Daniel Escobar, an analyst at brokerage Global Securities in Bogota.

A debt-reduction committee with special powers that was supposed to dissolve congressional gridlock in Washington is instead on the brink of failure, setting the stage for $1.2 trillion in automatic spending cuts. Standard & Poor’s cut the U.S.’s rating to AA+ from AAA on Aug. 5, citing the nation’s political process and criticizing lawmakers for failing to cut spending or raise revenue enough to reduce budget deficits.

Germany’s Finance Ministry said the country’s expansion has gotten “noticeably slower,” while Moody’s Investors Service said in a report today that rising financing costs are increasing France’s fiscal challenges.

The yield on Colombia’s 10 percent bonds due in July 2024 rose three basis points, or 0.03 percentage point, to 7.55 percent, according to the central bank. The bond’s price fell 0.281 centavo to 119.512 centavos per peso.

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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