Peru’s sol gained the most since 2009 amid speculation investors closed out of bets against the currency in the forwards market, creating a surplus of dollars.
The currency strengthened 1.6 percent to a one-month high of 3.201 per dollar as of 3:50 p.m. New York time, according to Datatec prices, helped by a jump in prices for its copper exports and as other regional currencies gained, led by the Colombian peso.
Traders’ decisions to not roll over the short sol positions in non-deliverable forwards left local banks holding a surplus of greenbacks that they sold into the spot market, according to Gonzalo Navarro, a currency trader at BBVA Banco Continental in Lima. Peru’s central bank, which regularly intervenes to defend its currency, last month restricted liquidity in the forwards market to slow the depreciation. Forward points in the Peruvian sol subsequently spiked to multi-year highs.
“The local banks had around $600 million of liquidity so there is supply that isn’t being absorbed,” Navarro said. “That was a surprise. The majority of this would have been people who bought dollars against sol a month ago and haven’t rolled over.”