Latin Currencies Keep Rising—Until They Don’t
A climb in the real and Colombian peso could reverse itself
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On Aug. 12 Latin American finance ministers will meet for the second time in a week to discuss how to contain the damage from their currencies’ steady appreciation. They may soon face the opposite problem: what to do if investors react to the debt crises in rich nations by dumping emerging-market assets, a move that might actually crater the region’s currencies.
Latin America’s six major currencies strengthened 30 percent as the region bounced back from the financial crisis of 2008. Capital flooded in thanks to near-zero interest rates in the U.S., Europe, and Japan that led investors to seek higher-yielding assets elsewhere. Another factor: Asian demand soared for the region’s iron ore, copper, and soy.