• Crude drops to lowest since 2008 on view oversupply to remain
  • Peso is the biggest decliner among 31 major currencies

Colombia’s peso dropped to a record low and led declines among major currencies after oil tumbled on forecasts that the crude market will remain oversupplied.

The peso plunged 2.5 percent to 3,331 per dollar at the close in Bogota after touching 3,339.60, surpassing the all-time low it had reached earlier this week. One-month implied volatility rose to 20.85 percent, the third-highest among emerging-market currencies.

Oil, which accounts for about 40 percent of Colombia’s exports, fell as much as much as 6 percent in London for a sixth day of losses. The global surplus will persist at least until late 2016 as demand growth slows and the Organization of Petroleum Exporting Countries shows “renewed determination” to maximize production, the International Energy Agency said Friday. Reduced liquidity in the Colombian currency market brought about by negative cash holdings of dollars held by banks is also making the peso more volatile, according to German Cristancho, the head analyst at Corredores Davivienda.

"It’s all about oil," Cristancho said by phone from Bogota. "The peso is more sensitive because the low liquidity magnifies the move."

The local currency market has been trading about $600 million a day in the past few days, compared with an average of about $1.1 billion, Cristancho said.

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