Peru’s Sol Falls Most in Two Months on Central Bank Purchases

Peru’s sol posted its steepest decline in two months after the central bank stepped up dollar purchases to soak up supply from companies paying taxes in local currency.

The sol depreciated 0.2 percent to 2.5424 per U.S. dollar today, the biggest drop since Nov. 16, according to data compiled by Bloomberg.

The central bank said on its website it bought $300 million in the spot market today after purchasing $350 million yesterday, the most in five months. Mining companies, which account for 60 percent of the country’s exports, are probably buying soles before an annual deadline for income tax payments in April, spurring the currency to a 16-year high yesterday, said Mario Guerrero, an economist at Scotiabank Peru SA.

“It’s unusual to have such a high demand for soles at the start of the year,” Guerrero said in a telephone interview from Lima. The central bank is trying to prevent “sharp movements in the currency.”

The sol touched 2.5375 per dollar yesterday, the strongest level since October 1996, data from Peru’s financial regulator show.

The yield on the nation’s benchmark 7.84 percent sol-denominated bond due August 2020 fell one basis point, or 0.01 percentage point, to 3.71 percent, according to prices compiled by Bloomberg. The price rose 0.07 centimo to 126.91 centimos per sol.

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