Peru Sol Falls as ECB Loan Concern Weakens Emerging Currencies

The Peruvian sol weakened for a second day amid a sell-off in emerging-market currencies as concern about the health of European banks sapped demand for higher-yielding assets.

The currency slipped 0.1 percent for a second straight day, declining to 2.6973 per U.S. dollar at the close of trading in Lima, from 2.695 yesterday, according to prices from Deutsche Bank AG’s Peruvian unit. The Bloomberg JPMorgan Latin American Currency Index fell 0.2 percent.

Of 25 emerging-market currencies tracked by Bloomberg, 17 weakened against the dollar today after a surge in the European Central Bank’s balance sheet showed the extent of its efforts last week to keep money flowing among European lenders. The sol reached 2.6925 per dollar on Dec. 23, the strongest since at least 2008 as companies sold dollars to pay tax bills.

“In the last couple of days liquidity has been a factor and so we have seen some erratic behavior, but the sol is reflecting what is happening in regional currencies,” said Benito Berber, a New York-based strategist at Nomura Holdings Inc.

The central bank didn’t buy or sell any dollars today.

The yield on the nation’s benchmark 7.84 percent sol-denominated bonds due August 2020 rose one basis point, or 0.01 percentage point, to 5.76 percent, according to prices compiled by Bloomberg.

Moody’s Investors Service today confirmed its credit rating of Peru at Baa3, one level above junk, and reiterated that it may upgrade it, saying the risk the government may hamper growth has fallen since President Ollanta Humala took office four months ago.

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