Colombian Peso Rises to Two-Week High on Tax Payment Speculation

Colombia’s peso touched a two-week high on speculation companies will repatriate dollars to pay local taxes in April.

The peso touched 1,795.72 per U.S. dollar today, the strongest since Feb. 25. It was little changed at 1,798.30 at the close of trading in Bogota.

“The peso is going to trend higher as we see companies bring in dollars to pay for taxes,” said Camilo Perez, head analyst at Banco de Bogota SA, Colombia’s second-biggest bank. The inflows will lead the peso to appreciate to as high as 1,760 by the end of April, he said.

Colombia needs to find new ways to curb a rally in the peso, President Juan Manuel Santos said today at the swearing-in ceremony of new central bank board members Ana Fernanda Maiguashca and Adolfo Meisel. In a speech yesterday, Santos said that the government “hasn’t dropped its guard” on the currency’s appreciation, which curbs exporters’ profit margins.

The peso has declined 1.7 percent this year as policy makers announced increased dollar purchases in the foreign-exchange market after it touched a 17-month intraday high on Jan. 2.

Colombia’s currency will remain trading between 1,750 and 1,800 per U.S. dollar, and close to 1,800 in the first half of 2013, Barclays Plc analysts including Alejandro Arreaza wrote in a report today.

The central bank 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. Finance Minister Mauricio Cardenas has also said that Colombia will buy $1 billion to pay for interest and principal on foreign bonds coming due this year, in addition to the $1 billion it will purchase for its oil-stability fund.

Yields on Colombia’s benchmark peso bonds due 2024 rose two basis points, or 0.02 percentage point, to 4.92 percent, according to the central bank.

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