Peru Sol Advances on Tax Payments as Central Bank Buys Dollars

Peru’s sol strengthened for the second time this week as companies bought the currency to pay local income taxes, leading the central bank to buy dollars to stem gains.

The sol gained 0.1 percent to 2.6540 per U.S. dollar at the close of trading, from 2.6565 yesterday, according to Deutsche Bank AG’s local unit. The currency earlier touched 2.6510, the strongest since 1997, data from Peru’s financial regulator show.

Companies are selling the U.S. currency before an April 26 deadline for monthly tax payments. Mining companies, which account for about 30 percent of the Andean nation’s income-tax revenue, are the main sellers of dollars for tax purposes, according to Mario Guerrero, an economist at Scotiabank Peru.

“Local flows carry more weight” than today’s declines in copper, gold and U.S. equities, Guerrero said.

The central bank bought $162 million in the spot market today to slow gains in the sol. It paid an average of 2.6548 soles per dollar, the bank said on its website.

Copper, Peru’s top export, declined for the first time in three days on concern the Chinese economy is slowing and Spain’s debt crisis is getting worse, while gold also fell. The Standard & Poor’s 500 Index retreated 0.4 percent.

The yield on Peru’s benchmark 7.84 percent sol-denominated bond due August 2020 increased two basis points, or 0.02 percentage point, to 5.34 percent, according to prices compiled by Bloomberg. The price dropped 0.13 centimo to 116.54 centimos per sol.

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

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

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