Peru’s Sol Weakens as Central Bank Acts to Slow Appreciation

Peru’s sol fell from a 15-year high after the central bank bought dollars in the spot market to ease gains in the local currency.

The sol fell 0.1 percent to 2.6175 per U.S. dollar, according to Deutsche Bank AG’s local unit. Yesterday it closed at 2.616, its strongest level since 1997, data from Peru’s financial regulator shows.

Exporters buying soles to pay local taxes this month are pushing gains in the currency, and Peru’s unexpected trade surplus in June is also leading to bets for stronger inflows, according to Gonzalo Navarro, the head trader at Banco Santander in Lima. The central bank acted to stem the advance, he said.

“The central bank has been intervening even as bank dollar holdings are low,” Navarro said in a phone interview from Lima. “Investors are betting on a stronger sol given tax inflows and the trade surplus that was much higher than expected.”

The central bank bought $16 million in the spot market today, extending its purchases this month to $21 million.

Peru posted a $442 million trade surplus in June, the nation’s statistics agency said in a report today, up from a revised $58 million surplus in May and compared to the median forecast among analysts surveyed by Bloomberg for a $30 million trade deficit.

The yield on the nation’s benchmark 7.84 percent sol- denominated bond due in August 2020 rose two basis points, or 0.02 percentage point, to 4.57 percent, according to prices compiled by Bloomberg. The price fell 0.16 centimo to 121.55 centimos per sol.

Peru’s policy makers will probably leave the benchmark interest rate unchanged for a 15th consecutive month at 4.25 percent, according to all 15 economists surveyed by Bloomberg. The central bank board, led by bank President Julio Velarde, will announce its decision at about 6 p.m. in Lima.

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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