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Peruvian Sol Weakens as U.S. Budget Concern Saps Risk Demand

Peru’s sol declined the most in more than a week on concern that U.S. lawmakers will struggle to reach a budget compromise and endanger the global recovery.

The sol depreciated 0.3 percent to 2.6080 per U.S. dollar today in Lima, according to Deutsche Bank AG’s local unit. It has fallen 0.4 percent in November, the most among the six most-traded Latin American currencies tracked by Bloomberg.

The U.S., Peru’s biggest trading partner after China, faces a so-called “fiscal cliff” of $607 billion in mandated spending cuts and tax increases scheduled to take effect starting Jan. 1 if lawmakers can’t agree to reduce the deficit following yesterday’s re-election of President Barack Obama. The Congressional Budget Office has said the world’s biggest economy would slow by as much as 0.5 percent next year if no change is made.

“Today’s move is most likely based on global risk and concerns about the fiscal cliff,” said Kenneth Lam, a strategist at Citigroup Inc. in New York.

Peru’s central bank bought $20 million in the foreign exchange market today and said on its website is paid an average 2.6069 soles per dollar. The monetary authority has bought dollars every day since Sept. 3 as part of a strategy to curb currency speculation by making movements in the sol less predictable. Previously the bank only purchased dollars to stem sol appreciation.

The yield on the nation’s benchmark 7.84 percent sol-denominated bond due August 2020 fell three basis points, or 0.03 percentage point, to 4.28 percent, according to prices compiled by Bloomberg. The price rose 0.18 centimo to 123.15 centimos per sol.

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