Colombia Peso Rises to Week High as European Plan Boosts Demand

Colombia’s peso advanced to the highest level in a week after European Union leaders took a step toward resolving the region’s debt crisis, buoying demand for emerging-market assets.

The peso gained 1.3 percent to 1,783.76 per dollar after touching 1,780.95, the strongest level since June 22. It gained 0.3 percent this quarter and has rallied 8.7 percent this year, the best performance among world currencies tracked by Bloomberg.

“The EU summit is driving strong gains in markets today,” Julian Marquez, an analyst in Bogota at Interbolsa SA, Colombia’s largest brokerage, said by phone. “The market is very optimistic today. Makes you wonder if it will last.”

Colombia’s central bank left the overnight lending rate at a three-year high of 5.25 percent today, matching the forecast of all 33 economists surveyed by Bloomberg. The announcement came after markets closed.

The decision wasn’t unanimous, central bank chief Jose Dario Uribe told reporters in Bogota after the meeting.

“The central bank reached a neutral rate where it allows the economy to grow at a stable pace,” said Ricardo Bernal, the head analyst at Serfinco SA brokerage in Bogota. “The bank already was expecting a deceleration in Europe, so as long things don’t get much worse we’ll see rates on hold at least through the third quarter.”

Dollar Purchases

President Juan Manuel Santos told coffee growers in Medellin on June 27 that he asked policy makers to buy more dollars in the currency market to weaken the peso toward 2,000 against the U.S. currency.

Reiterating plans to buy a minimum of $20 million daily in the spot market until at least Nov. 2, Uribe said today the central bank would like a more devalued peso.

Leaders of the 17 euro countries dropped requirements that taxpayers get preferred creditor status on aid to Spain’s banks and opened the way to recapitalize lenders directly. Talks ended at 4:30 a.m. in Brussels today.

The yield on Colombia’s 10 percent peso-denominated debt due in July 2024 rose one basis point, or 0.01 percentage point, to 7.01 percent, according to the central bank.

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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