Colombia Peso Declines After Santos Calls for Weaker Currency

Colombia’s currency declined after President Juan Manuel Santos asked the central bank to take “more aggressive” action to weaken the peso and as concern Europe’s debt crisis is getting worse sapped demand for higher-yielding, emerging-market assets.

The peso slid 0.6 percent to 1,806.50 per dollar. It touched 1,809.90 on June 26, the weakest level since June 5. The currency has fallen 1 percent this quarter, paring this year’s rally to 7.3 percent, still the best performance among world currencies tracked by Bloomberg.

Santos told coffee growers in Medellin yesterday that he asked policy makers to buy more dollars in the currency market to increase the country’s international reserves and weaken the peso toward 2,000 per dollar. Banco de la Republica holds its monetary policy meeting tomorrow.

“The peso is weakening in line with global markets amid concern over Europe,” said Alejandro Reyes, the head analyst at Ultrabursatiles SA brokerage. “Given the central bank’s meeting is tomorrow, Santos’s comments are probably also driving declines.”

The central bank has said it will buy a minimum of $20 million daily in the spot market until at least Nov. 2.

Global stocks fell as a two-day European summit started amid speculation the leaders will fail to agree on a strategy to solve the euro-region’s debt crisis, and as Germany’s unemployment rate rose.

Colombian policy makers will leave the overnight lending rate unchanged at 5.25 percent tomorrow, according to all 32 economists surveyed by Bloomberg.

The yield on Colombia’s 10 percent peso-denominated debt due in July 2024 rose one basis point, or 0.01 percentage point, to 7 percent, according to the central bank.

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