Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Peru’s Sol Falls as Government Boosts Efforts to Offset Inflows

Feb. 19 (Bloomberg) -- Peru’s sol touched the lowest level in two weeks after the government said it’s ready to boost dollar purchases to weaken Latin America’s best-performing currency of the past year.

The sol dropped 0.2 percent to 2.5820 per U.S. dollar at today’s close, extending its decline this year to 1.2 percent, according to prices compiled by Bloomberg. It earlier fell to 2.5850, the weakest intraday level since Feb. 1.

Finance Minister Miguel Castilla said yesterday the government may expand a plan to sell soles to buy $4 billion in the foreign exchange market. The sol advanced 5.4 percent last year, the fastest pace since 2009, even after the central bank bought a record $13.9 billion to offset inflows amid increased demand for the government’s local currency bonds.

The authorities are “trying to remove the market’s one-sided bets” against the dollar, said Alejandro Cuadrado, the head of Latin American currency strategy at Banco Bilbao Vizcaya Argentaria SA in New York. “The more they can keep investors on the sidelines, the more effective the policy can be.”

The sol’s 3.9 percent gain in the past year is the strongest among the six most-traded Latin American currencies tracked by Bloomberg.

Most of the dollars flowing into Peru’s $200 billion economy stem from long-term investment projects and financing, and the government is more concerned about short-term flows causing “accelerated appreciation” in the sol, Castilla told reporters yesterday.

The finance ministry will use $1.8 billion of the dollars it buys to prepay multilateral loans, $1 billion to service debt and $1.2 billion to boost the government’s contingency fund, he said.

Castilla said the ministry decided against issuing bonds to finance debt servicing this year and will draw on tax revenue instead. The government doesn’t plan to buy back dollar-denominated bonds because prices are too high, he said.

The central bank said on its website it bought $10 million today. It’s bought $3.3 billion this year, boosting Peru’s international reserves to a record $67.6 billion.

The yield on Peru’s benchmark 7.84 percent sol-denominated bond due August 2020 declined two basis points, or 0.02 percentage point, to 3.75 percent at 2:30 p.m. in Lima, according to prices compiled by Bloomberg. The price climbed 0.11 centimo to 126.34 centimos per sol.

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

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.