Peru Sol Falls to One-Week Low on Reserve Requirement Increase

Peru’s sol fell to the lowest level in a week as local lenders boosted dollar holdings to comply with higher reserve requirements that the central bank established to cool credit growth.

The sol declined 0.1 percent to 2.5505 per U.S. dollar at the close of trading in Lima.

The monetary authority increased the reserve ratio for sol and greenback deposits effective Jan. 1 to slow dollar lending and tame a rally in the local currency. The sol has gained 1.3 percent in the past three months, the best performance among its six most-traded peers in Latin America after Colombia’s peso, according to data compiled by Bloomberg.

The sol’s appreciation has been “interrupted in the short term” as banks increase the amount of dollars held at the central bank, said Juan Carlos Odar, an economist at Banco de Credito del Peru in Lima.

Loans denominated in U.S. currency increased 16.6 percent to $28.3 billion in November, the fastest pace in eight months, and accounted for 43.4 percent of all outstanding loans to companies and households, the central bank said in a Dec. 28 report. Sol loans grew 16.6 percent, the slowest since May.

The yield on the nation’s benchmark 7.84 percent sol-denominated bond due August 2020 fell four basis points, or 0.04 percentage point, to 3.85 percent, according to prices compiled by Bloomberg. The price rose 0.3 centimo to 125.89 centimos per sol.

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