Colombia Peso Weakens as Fed Damps Speculation on Further Easing

Colombia’s peso fell after the Federal Reserve’s improved assessment of the U.S. economy reduced speculation it will begin a third round of bond buying that would further depreciate the dollar.

The peso fell 0.3 percent to 1764 per U.S. dollar today in Bogota, from 1758.15 yesterday. The currency has jumped 9.9 percent this year, the best performance among 25 emerging-market currencies tracked by Bloomberg.

Most emerging-market currencies weakened after the Federal Open Market Committee said yesterday it expects “moderate economic growth” and predicted the U.S. unemployment rate “will decline gradually.” The comments reduced speculation the central bank will undertake so-called quantitative easing to stimulate the world’s largest economy.

“The improved outlook for the U.S. economy makes the dollar stronger compared to other currencies and it has affected the move in Colombia’s peso today,” said Daniel Escobar, head analyst at Global Securities brokerage in Bogota. “We’re simply following the international trend.”

The Brazilian real declined 1.1 percent to 1.8123 per U.S. dollar at 3:30 p.m. in Sao Paulo, while the Mexican peso sank 1.2 percent, the most among major Latin American currencies.

The yield on Colombia’s 10 percent peso-denominated debt due July 2024 rose 10 basis points, or 0.10 percentage point, to 7.29 percent, according to the central bank. That’s the biggest gain on a closing basis since Oct. 3. The price fell 0.922 centavo to 121.5150 centavos per peso.

Bond Auction

Yields on Colombian peso bonds fell at a government auction of fixed-rate securities today.

The yield on the bonds due August 2026 fell to 7.42 percent from 7.61 percent at the last auction on Feb. 22.

Colombia also sold bonds due October 2018 to yield 6.8 percent, down from 6.93 percent previously, and auctioned notes due in June 2016 to yield 6.48 percent, the Finance Ministry said in a statement.

Investor demand for the fixed-rate securities totaled 1.32 trillion pesos ($747 million), more than 3 times the 400 billion pesos of debt offered, the ministry said in the statement.

To contact the reporter on this story: Christine Jenkins in New York at cjenkins28@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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