Peru’s sol held near a 15-year high as companies bought the currency to pay local income taxes and copper prices rose on optimism that U.S. demand will grow.
The sol was unchanged at 2.6680 at today’s close, according to Deutsche Bank AG’s local unit. The currency earlier touched 2.6670, the strongest level since 1997, data from Peru’s financial regulator show. It gained 1.1 percent this quarter.
Companies are paying income taxes in soles before an April 10 deadline for completing annual payments, leading the central bank to purchase dollars to soak up the additional supply. Copper capped its biggest quarterly gain since 2010 after U.S. personal spending and consumer confidence topped forecasts. Metals, led by copper, account for two-thirds of Peru’s exports.
“The tax payment period is almost over but there’s still a lot of dollars being sold, mainly by mining companies,” said Gonzalo Navarro, the head trader at Banco Santander in Lima. “Commodities are very important to the country’s economic growth.”
The central bank bought $5.56 billion in the spot currency market this quarter, including $125 million today, to stem gains in the sol. It paid an average 2.6680 soles per dollar in today’s purchases, according to a statement on the bank’s website.
The central bank may buy fewer dollars next month as the tax payment period ends and policy makers allow the sol to strengthen to help ease inflation after a surge in prices this month, Navarro said.
Consumer prices probably climbed 0.6 percent from February, the most in eight months, according to the median estimate of seven analysts surveyed by Bloomberg.
“The central bank has let the currency strengthen in the short-term when it’s had a problem with inflation in the past,” Navarro said. “The benchmark rate is the main instrument for managing inflation in the medium and long term, but the exchange rate has an impact in the short term.”
The yield on Peru’s benchmark 7.84 percent sol-denominated bond due August 2020 was unchanged at 5.46 percent, according to prices compiled by Bloomberg.
The extra yield investors demand to own Peruvian government bonds instead of U.S. Treasuries fell seven basis points, or 0.07 percentage point, to 157, according to JPMorgan Chase & Co.