Peruvian Sol Slips to Nine-Week Low on Central Bank Purchases

Peru’s sol slipped to a nine-week low after the central bank intervened to remove excess dollars from the currency market as exporters pay taxes.

The sol fell less than 0.1 percent to 2.5780 per U.S. dollar, the lowest close since Dec. 5, according to data compiled by Bloomberg. The currency extended its drop this year to 1 percent. The central bank said on its website it purchased $120 million in U.S. currency today.

The monetary authority has bought $680 million this week, the most since mid-January, as exporters convert greenbacks to pay local taxes before an annual deadline in April.

“This is going to be a seasonal demand for soles that is going to change after April,” said Pedro Tuesta, a Washington- based Latin America economist at 4Cast Inc. “The seasonality is always very strong in the first quarter.”

The central bank has increased its average daily purchases to $97 million this quarter from $48 million in the previous period to contain the sol. The sol has rallied 4.3 percent in the past year, the most among six major Latin America currencies tracked by Bloomberg.

Expectations that Peru will keep borrowing costs on hold is boosting demand for sol-denominated bonds, Tuesta said.

Policy makers meeting today will leave the target lending rate at 4.25 percent for a 21st straight month, according to analysts surveyed by Bloomberg. The central bank is due to announce its decision at 6 p.m. Lima time.

The yield on the benchmark 7.84 percent sol-denominated bond due in August 2020 fell two basis points, or 0.02 percentage point, to 3.76 percent at 3:14 p.m. in Lima, according to data compiled by Bloomberg. The price climbed 0.13 centimo to 126.36 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

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