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Colombia Peso Gains to Two-Month High as Banks Sell Dollars

Jan. 4 (Bloomberg) -- Colombia’s peso rose to a two-month high as local banks reduced dollar holdings and on speculation increased foreign investment into the South American country will boost gains in the currency.

The peso jumped 1.1 percent to 1,885.75 per U.S. dollar, from 1,906.97 yesterday. Earlier it touched 1,883.71, its strongest level since Nov. 2. The peso has jumped 2.8 percent so far this year.

At the end of 2011, banks in Colombia increased the amount of dollars they hold after the central bank’s daily dollar purchases in 2010 depleted cash holdings of the U.S. currency, pushing the peso to plunge to a seven-month low.

“With the start of the new year banks noticed they are holding more dollars than they need,” said Juan Nicolas Garcia, a currency trader at HSBC Holdings Plc’s Colombia unit. Foreign direct investment “remains very strong, and so the peso will continue with its strengthening trend.”

Foreign direct investment probably rose to a record $13 billion in 2011, President Juan Manuel Santos said last month.

The yield on the nation’s 10 percent bonds due in July 2024 fell six basis points, or 0.06 percentage point, to 7.53 percent, according to the stock exchange. The bond’s price rose 0.509 centavo to 119.523 centavos per peso.

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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