Colombia’s Currency Advances on Dollar Repatriation Speculation

Colombia’s peso climbed to its highest level in a week on speculation companies will repatriate dollars to pay local taxes.

The peso appreciated 0.1 percent to 1,778.27 per U.S. dollar, its strongest level on a closing basis since Feb. 1. The currency has dropped 0.6 percent this year as the government and central bank announced increased dollar purchases to stem a rally that sent the peso to a 17-month intraday high on Jan. 2.

“Companies tend to bring large flows as they pay taxes this month, returning the peso to its strengthening trend,” said Francisco Chaves, a strategist at Corredores Asociados brokerage in Bogota. “The peso had been weakening, artificially kept around 1,790 by the government’s aggressive intervention.” The currency’s “fair value” is 1,765 to 1,780, Chaves said.

Banco de la Republica said Jan. 28 that it will buy at least $30 million a day, bringing purchases in the foreign-exchange market to $3 billion between February and May. A stronger peso curbs exporters’ profit margins.

Colombia’s “big aspiration” is a weaker currency to help its exporters, Finance Minister Mauricio Cardenas said yesterday. The peso should weaken to its “equilibrium” level of 1,950, he said.

Planned Issuance

Cardenas said today that the government is scaling back plans for overseas bond sales this year by $1 billion as part of its bid to ease gains in the local currency. Colombia will sell $600 million in foreign bonds in the remainder of this year after issuing $1 billion of debt last month, Cardenas told reporters in Bogota. The total is down 38 percent from the $2.6 billion of debt the government had said in December it would issue overseas.

Colombia will buy $1 billion in the currency market to pay for interest and principal on foreign bonds coming due this year, Cardenas said.

The yield on Colombia’s peso-denominated bonds due in 2024 rose one basis point, or 0.01 percentage point, to 5.07 percent, according to the central bank. The price fell 0.104 centavo to 141.979 centavos per peso.

Colombia’s 2013 financing needs were reduced by 1.8 trillion pesos after a Feb. 8 debt exchange with public entities, the Finance Ministry said in an e-mailed statement today. The government bought back inflation-linked debt due this year and in exchange gave investors peso bonds due in 2021, 2022 and 2026, according to the statement.

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