Colombia’s peso weakened the most in emerging markets as Finance Minister Mauricio Cardenas said the government would use its own money to buy dollars as the central bank exhausts a $1 billion intervention program.
The peso fell 0.6 percent to 1,923.80 per U.S. dollar at the close of trading in Bogota, its third consecutive drop. The decline was the biggest among 24 developing-nation currencies tracked by Bloomberg. The peso strengthened to a six-month high of 1,900.90 on May 8.
Cardenas, who has sought to weaken the peso since 2012 to favor exporters, said today in a Twitter post that the Treasury would use its own funds to intervene because a “competitive” exchange rate is a priority for the country. The government wants to prevent the peso from strengthening past 1,900 per dollar, according to Bogota-based brokerage Ultrabursatiles SA.
“To break the 1,900 barrier has a big psychological impact in the market and starts speculation that it could get even stronger,” Alejandro Reyes, the head of research at Ultrabursatiles, said by telephone from Bogota. “The Treasury reacted and is buying an important number of dollars, and is changing the mindset of investors, at least in the very short term.”
President Juan Manuel Santos said in an interview on RCN Radio yesterday that the “ideal” exchange rate would be between 2,000 and 2,200 pesos per dollar.
The central bank will reach its $1 billion purchase limit for the second quarter, Cardenas said May 9.
Cardenas said today via Twitter that the Treasury would buy dollars “in so far as it is necessary,” without giving details on the amount or time period. The Finance Ministry declined to provide further details when contacted by e-mail.
“The Treasury is intervening, buying dollars, taking advantage of the fact that they are cheap,” Cardenas said in interview in Bogota today.
The currency rallied after JPMorgan Chase & Co. said March 19 it could more than double Colombia’s weighting in two of its emerging-market bond indexes, fueling speculation that investors would pour more money into the Andean country.
The yield on the nation’s benchmark peso bonds due in 2024 rose 0.04 percentage point today to 6.33 percent.
The central bank has spent $430 million on dollar purchases this quarter after buying $600 million in the first quarter. Since April 21, the bank has purchased an average of $19 million a day in foreign-exchange markets, compared with an average of $10.5 million from April 1 to April 16.