Colombia’s peso rose for a second day amid speculation that favorable tax policies and increasing confidence in the South American country’s security will spur foreign investment.
The currency advanced 0.1 percent to 1,762.70 per U.S. dollar at the close of trading in Bogota. It touched 1,750.50 yesterday, the strongest level since July 2011.
Traders are betting more money will flow into the country after Colombian lawmakers last month passed a bill to cut taxes on foreigners’ bond profits to 14 percent from 33 percent, according to Diana Guiza, an analyst at Bogota-based brokerage Corredores Asociados. Colombia’s peso gained 9.7 percent last year, the most after the Polish zloty and Hungarian forint among 171 currencies tracked by Bloomberg.
“The peso historically has a tendency to gain in the first half of the year amid rising foreign direct investment,” Guiza said in a phone interview. “The tax cut should also be a driver as it attracts portfolio investment.”
The peso strengthened last year as army victories over guerrillas opened up swaths of countryside to overseas investment in mining and oil.
Colombia’s central bank Governor Jose Dario Uribe said yesterday on RCN Radio that the strong peso is a concern and reiterated that Banco de la Republica will buy at least $20 million a day through at least the first quarter. The central bank printed pesos to buy a record $4.4 billion last year.
The yield on the government’s 10 percent peso-denominated debt due in July 2024 was little changed at 5.66 percent, according to the central bank. That’s the lowest closing level since the bonds were first issued in 2009.
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