Peru’s Sol Rises to Seven-Week High on Fed Stimulus Prospects

Peru’s sol climbed to its highest level in seven weeks as speculation the Federal Reserve will take steps to boost U.S. growth spurred demand for higher- yielding, emerging-market currencies.

The sol appreciated 0.4 percent to 2.6355 per U.S. dollar at today’s close, matching the level on April 30, according to Deutsche Bank AG’s local unit.

Twelve of 21 primary dealers that trade with the Fed expect some form of added stimulus from the Fed meeting today and tomorrow, while nine expect no action. Europe’s situation poses “significant risks” to the U.S. economy, and America’s central bank was prepared to take action if necessary, Fed Chairman Ben S. Bernanke said June 7.

“We don’t know what is going to happen with the Fed so investors may have got a bit ahead of themselves,” said Pedro Tuesta, a Washington-based Latin America economist at 4Cast Inc. “If the Fed comes with easing,” Peru’s central bank will probably resume dollar purchases to slow the gains in the sol, Tuesta said.

Peru’s central bank has bought $8 billion this year and last purchased dollars May 8 when the local currency traded at 2.6410. The bank sold $676 million last month to support the sol as the euro zone’s deepening debt crisis curtailed demand.

The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell three basis points, or 0.03 percentage point, to 5.06 percent, according to prices compiled by Bloomberg. The price rose 0.22 centimo to 118.30 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