Colombian Peso Strengthens on Oil Gain, Global Growth Optimism

Colombia’s peso advanced as oil, the nation’s biggest export, rose on speculation central banks will take steps to support the global economic recovery.

The peso strengthened 0.3 percent to 1,787.15 per U.S. dollar. It has gained 8.5 percent this year, the best performance among all currencies tracked by Bloomberg.

“Oil is gaining and that helps the peso,” said Camilo Perez, the head analyst at Banco de Bogota, the nation’s second-biggest bank.

Crude futures rose as much as 1.6 percent after the U.S. Energy Department said stockpiles declined the most since December. Oil accounted for 49 percent of Colombia’s sales abroad last year. After oil and Colombian markets closed today, the Federal Reserve said it would take new steps as needed to boost the weakening expansion and reduce unemployment. The European Central Bank’s Governing Council gathers tomorrow.

Speculation that Colombia’s central bank will increase its daily dollar purchases to stem the peso’s rally is helping ease gains in the local currency, according to Perez.

While central bank chief Jose Dario Uribe reiterated on July 27 that the bank will buy a minimum of $20 million daily in the spot market until at least Nov. 2, Finance Minister Juan Carlos Echeverry said that day that several board members wanted increased dollar purchases.

Dollar Purchases

“The risk of greater intervention remains,” said Perez. He forecasts policy makers will wait until the Aug. 24 monetary policy meeting to announce an increase to $40 million daily.

The yield on Colombia’s 10 percent peso-denominated debt due in July 2024 was little changed at 6.66 percent, according to the central bank.

The yield has fallen 11 basis points since Banco de la Republica unexpectedly cut interest rates a quarter percentage point to 5 percent on July 27. The move surprised 24 of 35 economists surveyed by Bloomberg, who had predicted no change.

Colombia’s borrowing costs fell at an auction today of inflation-linked bonds. The government sold the debt due March 2021 to yield 3.57 percent, the Finance Ministry said in a statement, down from 3.59 percent at the last auction on July 18. Investor demand for the securities totaled 516 billion pesos ($289 million), compared to the 200 billion pesos offered.

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