Colombia Weighs Increased Dollar Purchases to Curb Peso Rally

Colombia may step up its dollar purchase program to curb a rally in the peso, President Juan Manuel Santos said.

The central bank has purchased $772 million this quarter after buying $600 million in the first three months of 2014.

Policy makers are studying “the manner in which this could be increased or strengthened to prevent the peso from continuing to appreciate,” Santos said today in an interview on Caracol Radio.

The peso has jumped 8.5 percent against the dollar in the past three months, the best performance among currencies tracked by Bloomberg. The rally was driven by increased demand for the nation’s local bonds after JPMorgan Chase & Co.’s said in March that it could more than double the weight of the securities in two of its gauges.

The currency advanced to a seven-month high of 1,882.65 per dollar yesterday, before slipping 0.1 percent to 1,884.32 at 8:50 a.m. in Bogota today. Santos said the currency’s “ideal” rate is close to a range of between 2,000 and 2,050.

At its March board meeting, the central bank pledged to buy as much as $1 billion from April to June. Finance Minister Mauricio Cardenas said last month the Treasury had joined the central bank and started purchasing dollars, using high tax receipts.

Santos will face former Finance Minister Oscar Ivan Zuluaga in a presidential runoff vote on June 15. A Gallup poll published June 5 gave Zuluaga the backing of 48.5 percent, compared with 47.7 percent for Santos. The poll of 1,200 people has a margin of error of 3 percentage points.

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