Colombian Peso Gains to Five-Month High, Leads Emerging Markets

  • Gains past 2,900 level crossed last week first time since Nov.
  • Local bond yields also declining by most in eight days

Colombia’s peso gained to the highest since November and led advances in emerging-market currencies as oil, the country’s main export, traded near the highest in more than five months.

The peso climbed 1.9 percent to 2,878.88 per dollar at 10:06 a.m. in Bogota, extending its advance this year to 10 percent. The gains pushed it past the 2,900 level that it crossed last week for the first time since November. The recent rally has left the peso overvalued by some analysts’ estimates, with the median prediction among strategists surveyed by Bloomberg calling for a 10 percent decline by the end of the year.

Oil rallied after reports showed a further drop in U.S. production, extending its rebound after slumping to the lowest since 2003 earlier this year. Traders are also betting that dollar inflows are rising this month amid overseas investment in local debt. Colombian stocks had their best quarter in almost six years in the first three months of the year, with the benchmark gauge advancing 16 percent as oil and gas producer Canacol Energy Ltd. rose 33 percent and Ecopetrol SA added 18 percent.

“We’re seeing a lot of appetite for local bonds from investors abroad," said Munir Jalil, an economist at Citigroup Inc. in Bogota. Oil has also been helping the peso, he said.

The yield on bonds due in 2024 fell 0.08 percentage point to 7.82 percent for the biggest drop in eight days.

The Colcap stock gauge added 0.2 percent. The index has posted declines for three consecutive years, including a 24 percent drop in 2015, when the peso slumped 25 percent.

Finance Minister Mauricio Cardenas said in a Twitter post late Tuesday that with investments of $1.7 billion this year, foreigners now hold close to 20 percent of local government bonds. “More confidence, more investment, lower rates,” Cardenas said in the post.

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