Colombian Peso Erases Gain as Bernanke Damps Outlook for Easing

Colombia’s peso erased earlier gains after Federal Reserve Chairman Ben S. Bernanke’s remarks to Congress damped speculation of more quantitative easing to bolster the world’s largest economy.

The peso was little changed at 1,767.70 per U.S. dollar at 11:49 a.m. in Bogota, from 1,767.35 yesterday when it touched 1,762.07, the strongest intraday level since Aug. 2. The currency has advanced 11 percent in the past three months, the second-best performer after the South African rand among 25 emerging-market currencies tracked by Bloomberg.

Bernanke’s testimony today to the House Financial Services Committee in Washington indicates that recent signs of strength in the U.S. economy won’t change the Fed’s view that “exceptionally low” interest rates are likely to be warranted at least through late 2014. At the same time, Bernanke gave no signal that additional policy easing is under consideration.

“Bernanke’s comments are impregnating the market with risk aversion,” said Nicolas Bernal, an analyst at Ultrabursatiles SA brokerage in Bogota.

The Colombian currency strengthened earlier on speculation investment flows will increase into the South American country after the European Central Bank provided lenders with a larger amount of cash than economists forecast. The ECB allotted 529.5 billion euros ($708 billion) in three-year funds. Economists predicted 470 billion euros, a Bloomberg survey showed.

In a bid to ease gains in the peso, Colombia’s central bank said Feb. 24 it will extend a program of daily purchases of a minimum of $20 million to at least Aug. 4, from the initially announced minimum three-month period.

While Banco de la Republica’s dollar purchases are helping stem some of the peso’s gains, the trend for a stronger peso continues, said Bernal. Should the peso strengthen beyond 1,764, it will likely rise towards 1,745, he said.

The yield on the government’s 10 percent peso bonds due July 2024 rose one basis point, or 0.01 percentage point, to 7.34 percent, according to the central bank. The price fell 0.122 centavo to 121.103 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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