Feb. 3 (Bloomberg) -- Colombia’s peso fell the most in emerging markets after central bank Governor Jose Dario Uribe said a weakening currency is “something we view as positive.”
The peso depreciated 1.5 percent to 2,046.64 per U.S. dollar at the close in Bogota, the lowest level since December 2009. The drop was the biggest among 24 developing-nation currencies tracked by Bloomberg.
While the peso’s 4.3 percent monthly drop in January was the steepest since November 2011, Uribe and Finance Minister Mauricio Cardenas have signaled that the currency’s decline is good for the economy. Colombia’s central bank is the only one in the region still buying greenbacks, said Carolina Ramirez, a strategist at Banco Bilbao Vizcaya Argentaria’s Colombia unit.
“While other central banks are intervening to stop depreciation, Banco de la Republica is sending a clear signal it’s not worried,” Ramirez said in a phone interview from Bogota. “When that signal is this clear, investors don’t want to take the contrary stance.”
Colombia has an “enormous” margin for the peso to weaken before posing a threat to the bank’s inflation target, Uribe told reporters Jan. 31 after announcing the bank’s board voted unanimously to leave the overnight lending rate unchanged at 3.25 percent.
Banco de la Republica has the “flexibility” to continue with the pace of its intervention or it can stop buying dollars, Cardenas, who is also president of the central bank’s board, told reporters after the meeting.
“The current exchange rate is at a level that we consider good news,” Cardenas said. “It has an important impact on farmers and industry.” In an interview today on Caracol Radio, Cardenas said that a weaker peso would be “healthy.”
The central bank bought $10 million in the currency market today after purchasing $200 million last month. It plans to buy as much as $1 billion this quarter.
Peru’s central bank sold $275 million today, adding to the record $6.2 billion of U.S. currency it has sold in the last seven months to bolster the sol.
The Bloomberg-JP Morgan Latin America index of the region’s six most-traded currencies fell 1 percent to 89.39, the lowest closing level since March 2003.
Colombian consumer prices increased 1.94 percent last year, below the central bank’s inflation target range of 2 percent to 4 percent.
The inflation rate, which fell to a six-decade low in November, puts the country in a “more comfortable” position than many of its peers, where a devaluation may cause consumer prices to rise faster than target, Ana Fernanda Maiguashca, central bank co-director, said in an interview last month.
The currency may fall toward 2,150 before causing inflation concern, Nomura Holdings Inc. strategist Mario Castro wrote in a Jan. 30 report.
Yields on Colombia’s benchmark peso bonds due 2024 rose five basis points, or 0.05 percentage point, to 7.16 percent today, according to data from the central bank.
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