Colombia may take further action to curb the peso’s appreciation as it fights its “own little currency war” to protect export industries, Finance Minister Juan Carlos Echeverry said.
The Andean nation, which started buying at least $20 million a day on Feb. 6, may deploy a “richer battery of instruments” to limit gains in the currency, Echeverry said in an interview in Bogota today, without giving details.
“We care deeply for the impact of the exchange rate on the real economy,” Echeverry said. “We behave as if we were exporters.”
Like other emerging market currencies, Colombia’s peso has gained as policy makers in the U.S. and Europe loosen monetary policy to revive their economies, said Echeverry, who once worked as a teaching assistant to Federal Reserve Chairman Ben S. Bernanke at New York University. Brazil’s central bank bought dollars in the currency forwards market on Feb. 3 for the first time since July in an effort to slow a rally in the real.
Echeverry said that Colombia is “not seduced” by the idea of capital controls.
“There is no one single silver bullet,” he said. “We have been at least as successful, if not more, than Brazil in avoiding appreciation without resorting to capital controls.”
The peso touched an almost six-month high of 1,770 per dollar today after a new round of central bank dollar purchases failed to reverse its strengthening trend.
The currency would have gained further without the dollar purchases, Echeverry said. “They are incessant, continual purchases for three months that may be renewed, and that’s a fact the market takes into account,” he said.
The peso has strengthened 7.7 percent against the dollar over the past three months, the second-best performance among the seven most-traded Latin American currencies tracked by Bloomberg after the Mexican peso.
The central bank ended its previous, year-long, daily dollar purchase program on Sept. 30 after European debt turmoil led investors to dump emerging-market assets.
Colombia is considering increasing the proportion of dollar bonds as a percentage of its total debt over the “medium term,” as dollar revenue from oil revenue increases, Echeverry said.