Peru’s Sol Falls After Government Pledge to Bolster InterventionJohn Quigley
Peru’s sol dropped to a seven-week low after the government pledged to aid the central bank in removing excess dollars from the spot market to curb gains.
The sol slipped 0.2 percent to 2.5665 per U.S. dollar at today’s close, according to prices compiled by Bloomberg. That’s the weakest since Dec. 11.
Peru’s Finance Ministry will buy $4 billion from the spot market this year, including $2 billion to prepay debt, as it seeks to curb a rally in the sol after it touched a 16-year high this month. The country may also increase the percentage of assets that local pension funds can invest abroad next month to ease demand for the currency, Finance Minister Miguel Castilla said in an interview yesterday.
“This says to the market the currency is such an important issue that the ministry, central bank, the regulator all have to be involved,” said Antonio Diaz, a trader at Banco Internacional del Peru SAA.
The central bank bought $13.9 billion in the spot market last year and has purchased $1.8 billion this month to curb appreciation.
The sol has weakened 1.1 percent since touching 2.5375 on Jan. 14, the strongest level since 1996, data from Peru’s financial regulator show.
The yield on the nation’s benchmark 7.84 percent sol-denominated bond due in August 2020 climbed one basis point, or 0.01 percentage point, to 3.88 percent at 3:01 p.m. in Lima, according to data compiled by Bloomberg. The price fell 0.09 centimo to 125.46 centimos per sol.