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Colombian Peso Holds Near a Seven-Month High on Europe Loans

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Feb. 29 (Bloomberg) -- Colombia’s peso held near a seven-month high on speculation foreign investment in the South American country will increase after the European Central Bank provided lenders with more cash than economists had forecast.

The peso rose less than 0.1 percent to 1,767 per U.S. dollar at the close of trading in Bogota. It touched 1,762.07 yesterday, the strongest intraday level since Aug. 2. The currency has advanced 11 percent in the past three months, the second-best performer after the South African rand among 25 emerging-market currencies tracked by Bloomberg.

The ECB allotted 529.5 billion euros ($706 billion) in three-year funds, more than the 470 billion euros predicted by economists in a Bloomberg survey.

“Some of that liquidity will surely make it to emerging markets, including Colombia,” said Nicolas Bernal, an analyst at Ultrabursatiles SA brokerage in Bogota.

The Colombian currency pared earlier gains after Federal Reserve Chairman Ben S. Bernanke’s remarks to Congress damped speculation of more quantitative easing to bolster the world’s largest economy.

Bernanke’s testimony today to the House Financial Services Committee in Washington indicates that recent signs of strength in the U.S. economy won’t change the Fed’s view that “exceptionally low” interest rates are likely to be warranted at least through late 2014. At the same time, Bernanke gave no signal that additional policy easing is under consideration.

Dollar Purchases

In a bid to ease gains in the peso, Colombia’s central bank said Feb. 24 it will extend a program of daily purchases of a minimum of $20 million to at least Aug. 4, from the initially announced minimum three-month period.

While Banco de la Republica’s dollar purchases are helping stem some of the peso’s gains, the trend for a stronger peso continues, said Bernal. Should the peso strengthen beyond 1,764, it likely will rise toward 1,745, he said.

The yield on Colombia’s 10 percent peso bonds due July 2024 rose three basis points, or 0.03 percentage point, to 7.36 percent, according to the central bank. The price fell 0.295 centavo to 120.93 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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