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Colombian Peso Posts Weekly Decline on Intervention Speculation

Jan. 18 (Bloomberg) -- Colombia’s peso posted a weekly decline on speculation policy makers will boost dollar purchases to stem the local currency’s rally.

The peso depreciated 0.3 percent to 1,769.33 per U.S. dollar this week. It declined 0.2 percent today. The currency, which has gained 1.4 percent in the past month, touched 1,750.50 on Jan. 2, the strongest since July 2011.

Finance Minister Mauricio Cardenas told reporters yesterday that he is concerned about the peso’s rally and the government will use “all its ammunition” to stem gains, while ruling out capital controls which he said aren’t effective enough. President Juan Manuel Santos said today that additional measures are being studied. The peso has fallen amid similar comments from policy makers intended to stem the rally, said Eduardo Bolanos, an analyst at Asesores en Valores brokerage in Bogota.

“Verbal intervention will only take you so far, and now the market will want to see concrete actions,” Bolanos said in a phone interview.

Banco de la Republica probably will announce an increase in the amount of its daily dollar purchases when policy makers next meet on Jan. 28, Bolanos forecasts.

Policy makers will reduce the overnight lending rate 25 basis points, or 0.25 percentage point, to 4 percent this month, according to 21 of 23 economists surveyed by Bloomberg. Two analysts expect no change.

Lower interest rates may also help ease gains in the peso by reducing the appeal of the nation’s assets amid near zero interest rates in the U.S., Europe and Japan, Bolanos said.

The yield on Colombia’s 10 percent peso-denominated debt due in 2024 fell two basis points to 5.35 percent, according to the central bank. That’s the lowest closing level since the securities were issued in 2009.

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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