Peru Sol Rises to 16-Year High as Bond Yields Decline to Record

Peru’s sol rose to a 16-year high and yields on government bonds dropped to a record low as mining investment and overseas corporate debt sales spur inflows.

The currency gained 0.2 percent to 2.5488 per U.S. dollar at the close in Lima. The yield on the benchmark 7.84 percent sol bond due in 2020 fell one basis point, or 0.01 percentage point, to 3.90 percent.

The sol is trading at its strongest level since 1996 after appreciating 5.8 percent in 2012, the most since 2009, according to data from Peru’s financial regulator. The currency is the best performer in Latin America over the last five years as the country’s region-beating growth rate attracted foreign investment.

“It has been appreciating throughout the year, steadily grinding higher,” said Bret Rosen, a Latin American strategist at Standard Chartered Plc in New York. “The economy continues to perform as well, or better, than the region. It attracts investment and the central bank is allowing the gradual appreciation of the currency.”

Peru’s gross domestic product will expand 6.05 percent this year, the fastest pace in Latin America, according to International Monetary Fund estimates.

Foreign direct investment in Peru will rise 35 percent to $11.1 billion this year from last year, the central bank said in a Dec. 14 report. Peru will prepay as much as $1.5 billion of foreign debt next year as part of measures to slow the appreciation of the sol, Finance Minister Miguel Castilla said Dec. 22.

To contact the reporter on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net

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

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