Peru Sol Falls on Dollar Purchases, Government Intervention Plan

Peru’s sol declined toward a three-month low as the central bank bought dollars and the government pledged last week to help stem the local currency’s gains.

The sol depreciated 0.1 percent to 2.5835 per dollar at today’s close, according to data compiled by Bloomberg. The currency ended Feb. 21 at 2.5890, the weakest since Nov. 23.

The central bank said it bought $10 million of U.S. currency in the foreign exchange market today. The government will buy at least $1 billion to service foreign debt as part of the plan to offset dollar flows, Finance Minister Miguel Castilla said Feb. 18. It will also prepay $1.8 billion in multilateral debt and add $1.2 billion to contingency reserves.

“All this intervention is leading banks to go long dollars,” said Walther Benavides, a bond trader at Banco Continental SA in Lima.

The yield on Peru’s 7.84 percent sol-denominated bond due in August 2020 rose three basis points, or 0.03 percentage point, to 3.79 percent at 3:39 p.m., according to data compiled by Bloomberg. The price decreased 0.23 centimo to 125.98 centimos per sol.

Yields on the sol bonds are climbing on speculation the government will auction domestic debt, Benavides said.

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