Colombia Peso Gains After Bank Reduces Intervention Thresholdby
Policy makers lowered threshold for dollar auctions to 3%
Currency gains to three-week high; oil rises as much as 7.4%
Colombia’s peso advanced along with oil after the central bank lowered the threshold for when it will intervene in the currency market.
The peso gained 1.3 percent to 3,314.03 per U.S. dollar at 10:00 a.m. in Bogota, on course for its strongest close this month, after policy makers said Friday that they will auction foreign-exchange call options when the peso weakens 3 percent or more from the 20-day moving average, down from a previous level of 5 percent. The peso was also bolstered by the 7.4 percent jump in prices for oil, the country’s biggest export.
The central bank has never sold dollars under the intervention mechanism first announced at its October meeting, and is lowering the barrier to mitigate the impact of currency weakness on inflation, the bank said in a statement. The peso has tumbled 26 percent in the past 12 months, helping push inflation to more than double the target.
“It will be much easier for the threshold to be reached, and with a resurgence of risks or a new fall in the oil prices, it’s much more likely that the central bank will intervene,” Alejandro Reyes, the head of research at brokerage Ultraserfinco, said from Bogota.
Consumer prices rose 7.45 percent in January from a year earlier, the most in seven years, and inflation will probably still be above 5 percent at the end of the year, central bank Governor Jose Dario Uribe said Friday. Colombia targets inflation of 3 percent, plus or minus one percentage point.