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Peru Sells Dollars as Sol Drops to Five-Month Low on Fed Outlook

Peru sold dollars in the foreign exchange market to prop up the sol amid a broad sell-off in developing-country currencies.

Banco Central de Reserva del Peru sold U.S. currency soon after the market opened amid “strong” demand from foreign investors, said Antonio Diaz, a trader at Banco Internacional del Peru, in a phone interview from Lima. Most emerging market currencies fell as analysts projected the U.S. Federal Reserve would scale back monthly asset purchases that have bolstered demand for higher-yielding assets.

“The fact the central bank sold a good amount of dollars means we’re not feeling the sell-off that much here, but other countries have been badly hit,” Diaz said. “It’s the repercussions from Fed tapering and poor economic data from China.”

The central bank’s press office didn’t immediately return a telephone call seeking comment on the intervention. The bank said on its website that it called an auction to offer 300 million soles in dollar-linked certificates of deposit.

The sol fell 0.1 percent to 2.824 per dollar at 11:29 a.m. in Lima, after earlier touching 2.827, the weakest on a closing basis since Aug. 19.

The central bank tends to intervene toward the end of the trading day and announces any dollar sales or purchases on its website at 1:30 p.m. The bank has sold $470 million since Jan. 20 to stem declines after selling a record $5.2 billion in the second half of 2013.

Concern that emerging-market economies will be left exposed by a slowdown in China and a reduction in U.S. monetary stimulus fueled demand for the U.S. dollar and Treasuries as a haven.

The Federal Open Market Committee probably will cut purchases of Treasury and mortgage debt for a second time, from $75 billion to $65 billion a month, as it concludes a two-day meeting today, based on a Bloomberg News survey of economists on Jan. 10.

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net

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