Colombia Peso Heads for Weekly Drop on Higher Dollar Purchases

Colombia’s peso headed for a third weekly drop as policy makers increase dollar purchases while speculation mounts that the Federal Reserve will reduce U.S. stimulus that has buoyed demand for emerging-market assets.

The peso declined 1 percent this week to 1,936.40 per U.S. dollar as of 10:08 a.m. in Bogota. It rose 0.2 percent today.

The currency has fallen 2.4 percent in the past month, compared with a 4.1 percent drop in Brazil’s real and a 0.9 percent decline in Peru’s sol. While Brazil and Peru are acting to prop up their currencies, Colombia has increased the amount of dollars it buys to weaken the peso in the past week, seeking to reach its target of purchasing at least $2.5 billion from June to September, said Banco de Bogota SA (BOGOTA)’s Camilo Perez.

“It does stand out that Colombia is the only country in the region that is taking action” to weaken its currency, Perez, who is head analyst at the nation’s second-biggest bank, said in a telephone interview from Bogota. “Lately the central bank has accelerated its purchases, and it seems to be a question of credibility, of reaching the target they had announced.”

Banco de la Republica has purchased an average $38 million daily this week, up from an average of $29.4 million in the previous three weeks of August. Brazil on Aug. 22 announced a $60 billion intervention program in the currency market, a day after Peru sold a record $600 million to prop up the sol.

Fed Stimulus

Colombia’s peso and other emerging-market currencies have weakened since May after Fed Chairman Ben S. Bernanke signaled the possibility of paring back monthly bond purchases that have suppressed interest rates in developed markets and sent investors hunting for higher yields in riskier assets.

Colombian policy makers will leave the overnight lending rate unchanged at 3.25 percent today, according to all 29 economists surveyed by Bloomberg. The central bank usually announces its rate decision after the close of the foreign-exchange market at 1 p.m. in Bogota.

The yield on Colombia’s benchmark peso bonds due July 2024 fell six basis points, or 0.06 percentage point, to 7.02 percent, according to the stock exchange.

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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