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Colombia Peso Drops Most in Week as European Turmoil Saps Risk

April 18 (Bloomberg) -- Colombia’s peso fell the most in a week as European fiscal turmoil sapped demand for riskier assets in emerging markets.

The peso slipped 0.3 percent to 1,774.74 per U.S. dollar, the most since April 10. The currency was still up 9.2 percent this year in the best performance among all of the currencies tracked by Bloomberg.

“The market is focusing on uncertainty over Europe,” said Lucia Duarte, a currency strategist in Bogota at Bancolombia SA, the nation’s biggest bank. “That’s driving slight decreases in the peso as well as other currencies in the region.”

Global stocks declined as the Bank of Spain reported today that non-performing loans as a proportion of total lending jumped to 8.16 percent in February, the highest level since 1994, from less than 1 percent in 2007.

The peso will resume its gain as investment in Colombia rises, according to Duarte, who forecasts the currency will rally to 1,719 by the end of the year.

Foreign direct investment jumped 30 percent to $4.21 billion in the first three months of 2012 from a year earlier, with 72 percent going into oil and mining, according to trade-balance figures from the central bank. Foreign investment in stocks and bonds jumped 15 percent to $953 million in the same period from a year ago.

The yield on Colombia’s 10 percent peso-denominated debt due in July 2024 rose two basis points, or 0.02 percentage point, to 7.13 percent, according to the central bank. The bond’s price fell 0.206 centavo to 122.917 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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