Colombian Peso Jumps Most in Five Weeks on Cut in Dollar Rates

Colombia’s peso rose the most in five weeks after central banks including the Federal Reserve cut the cost of emergency dollar funding, helping easing strains in global financial markets caused and shore up demand for emerging-market assets.

The peso climbed 0.9 percent to 1,946.69 per U.S. dollar at 9:45 a.m. Bogota time, from 1,963.39 yesterday. The gain is the biggest since Oct. 27.

The central banks of the U.S., the euro region, Canada, the U.K., Japan and Switzerland agreed to cut the cost of providing dollar funding via swap arrangements, the Federal Reserve said, and decided to make other currencies available as needed. China said earlier today it will cut the reserve requirement ratio for banks by 0.5 percentage point from Dec. 5.

“Latin American currencies are rallying,” said Daniel Lozano, an analyst at Serfinco SA brokerage in Bogota. “A boost in liquidity favors the foreign-exchange market.”

Easing inflation concerns in Colombia, spurred by the central bank’s move to boost the benchmark overnight rate last week, are also helping fuel gains in bonds, according to Lozano.

The yield on Colombia’s 10 percent bonds due in July 2024 fell seven basis points, or 0.07 percentage point, to 7.62 percent, according to the stock exchange. The bond’s price rose 0.580 centavo to 118.810 centavos per peso.

Banco de la Republica raised the overnight lending rate by 25 basis points to 4.75 percent on Nov. 25, making Colombia the only country in Latin America to raise rates in the past four months. Brazil started cutting borrowing costs in August as countries across emerging markets began to protect their economies from the global slowdown.

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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