Velarde Sees Stronger Peru Currency in Two Years on Copper Surge

  • Central bank president says fundamentals point to appreciation
  • Sees excess of pessimism about outlook for developing markets

Peru’s currency slump has run its course, and the sol should appreciate in the next two years as new copper mines come on stream, said central bank President Julio Velarde.

“There’s an excess of pessimism not just in relation to Peru but South America, emerging markets and commodities,” leading currencies to overshoot, Velarde said at an event organized by the International Monetary Fund in Lima.

Copper output from the world’s third-largest producer will rise 78 percent in 2018 compared with last year’s volume as new mines enter production, Velarde said. The increased exports will boost economic growth and narrow the current account deficit, he said.

Peru’s sol has fallen 12 percent in the last year after copper revenue declined and the economy cooled. The central bank increased borrowing costs last week for the first time in four years to anchor inflation expectations for 2016 and as economic growth picks up, Velarde said.

One-time events, such as local investors moving their assets to dollars, have caused the sol to weaken. Velarde said he doesn’t see grounds for much more depreciation, adding the sol is likely to strengthen over the next two years providing that fundamentals don’t change.

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