Colombia’s peso fell to a 10-month low as the government said it was taking steps to weaken the currency by boosting demand for dollars from pension funds.
The peso depreciated 0.5 percent to 1,834.43 pesos per dollar at the close in Bogota, the weakest level on a closing basis since May 24.
The government is changing the rules governing pension funds to encourage them to invest more in foreign currency, Finance Minister Mauricio Cardenas said today at a press conference. A government fund known as Fonpet, which gets money from royalties on natural resources, will buy $1 billion of dollar assets this year instead of converting the proceeds into pesos, Cardenas told reporters afterward.
“The government’s action plan has been influencing the currency market a lot since last week,” said Diana Guiza, an analyst at Bogota-based brokerage Corredores Asociados.
The new measures will boost demand for dollars by $5 billion this year on a combined basis, according to Cardenas.
The changes are part of the government’s “Plan to Boost Productivity and Employment” announced today, a package of stimulus measures for industry and agriculture. The plan also entails mortgage subsidies and a goal of cutting loading times at ports.
Cardenas has called peso’s strength the “mother of all problems” in the economy. Last week, the minister told a meeting of the country’s pension fund association that the peso is about 10 percent overvalued.
Yields on Colombia’s peso bonds maturing in 2024 rose one basis point, or 0.01 percentage point, to 5.014 percent, according to the central bank. The price fell 0.1730 centavo to 142.1080 centavos per peso.