- Mexican peso and Brazil's real both weaken more than 1.5%
- Oil dropped below $44 a barrel and fell as much as 3.3%
Colombia’s peso posted the biggest drop in emerging markets as Latin American currencies tumbled amid a selloff in oil and riskier assets.
The peso weakened 2.7 percent to 2,913.73 per dollar in Bogota trading, its first drop in six days after gaining to the highest since November. A Bloomberg index of Latin American currencies, which reached a five-month high last week, sank the most since February as Mexico’s peso slid 2.1 percent and Brazil’s real lost 1.8 percent.
Latin American currencies have rallied this year as oil surged 18 percent and sentiment toward emerging markets improved amid optimism that global growth will accelerate. Colombia’s peso is closely correlated with prices for crude, the country’s biggest export, and even after Tuesday’s drop the currency is up 4.2 percent in the past month, the best performance among developing nations after the Russian ruble.
“Valuations were getting really stretched,” said Win Thin, the head of emerging-market strategy at New York-based Brown Brothers Harriman. Some of the region’s currencies reached “really rich levels,” he said.
Oil dropped below $44 a barrel before weekly U.S. government data forecast to show rising stockpiles kept crude supplies at the highest level in more than eight decades. Futures fell as much as 3.2 percent in New York, declining for a third day after reaching a five-month high.
Analysts predict Colombia’s peso has further to fall. The currency will drop 8.9 percent by the end of the year, according to the median forecast of strategists surveyed by Bloomberg.