Colombian Peso Posts Biggest Drop in Emerging Markets This Week

Colombia’s peso plunged the most among major emerging-market currencies this week on speculation inflows into the Andean country will slow.

The peso weakened 2.1 percent this week, including a 0.2 percent slide today to 1,924.21 per dollar at the close in Bogota. The currency is now at its weakest since May.

Policy makers including Finance Minister Mauricio Cardenas and central bank co-director Adolfo Meisel said this week that the foreign-exchange impact of JPMorgan Chase & Co.’s decision to more than double Colombia’s weighting in two of its bond indexes is fading. The disclosure last week that the government would delay its planned sale of an estimated $2.6 billion stake in power company Isagen SA led some investors to unwind bets that the transaction would bring dollar inflows, according to Francisco Chaves, head analyst at Corredores Asociados brokerage.

“You won’t see those dollars from the sale of Isagen come in, and that’s something investors had been expecting,” Chaves said in a phone interview from Bogota.

Local banks were also buying dollars in anticipation of increased demand for the greenback at the end of the year as foreign companies repatriate revenue, Chaves said. While the end of the year is several months off, they were loading up in expectation that a further weakening of the peso would make the dollars more expensive.

While the increase in Colombia’s weighting in bond indexes is carried out between May and September, most of the demand for local debt likely will happen through the end of this month, Chaves predicts.

Cardenas said Aug. 12 the government would wait as long as a year to auction a 57.6 percent stake in Isagen, for which Colombia wanted to get at least 5 trillion pesos ($2.6 billion) to help fund new roads. Several international companies had expressed interest.

The price on the nation’s benchmark peso bonds due 2024 rose 0.38 centavo to 124.12 centavos per peso, according to data from the central bank. The yield fell 5 basis points, or 0.05 percentage point, to 6.61 percent.

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