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Peru Sol Depreciates Third Day as Central Bank Buys $150 Million

Jan. 17 (Bloomberg) -- Peru’s sol fell for a third day as the central bank bought dollars to soak up supply from companies exchanging greenbacks for the local currency to pay taxes.

The sol weakened 0.1 percent to 2.5485 per U.S. dollar today, according to prices compiled by Bloomberg. It was the worst performance among the six most-actively traded Latin American currencies tracked by Bloomberg.

The central bank said on its website it bought $150 million in the spot market today, taking its total purchases this week to $950 million, the most in any four-day period since January 2008. Mining companies, which account for 60 percent of Peru’s exports, are buying soles before an annual deadline for income tax payments, according to Antonio Diaz, a trader at Banco Internacional del Peru SAA.

The scale of the central bank’s interventions makes it “very hard to predict where the currency will go over the coming days and weeks,” Diaz said by phone from Lima.

The central bank bought a record $13.9 billion last year to slow the pace of sol appreciation as mining investment and demand for government bonds spurs inflows. The sol closed at a 16-year high of 2.5390 on Jan 14., data from Peru’s financial regulator show.

The yield on the nation’s benchmark 7.84 percent sol-denominated bond due August 2020 rose two basis points, or 0.02 percentage point, to 3.74 percent at 3:15 p.m. in Lima, according to prices compiled by Bloomberg.

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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