Colombia Offers Foreign-Exchange Call Options After Peso Tumbles

  • Bank sells $411 million of options out of $500 million offered
  • Peso has dropped 6.5% in May, set for worst month since Nov.

Colombia’s central bank offered foreign-exchange call options for the first time in seven years, intervening to slow a plunge in the peso triggered by an emerging-market slump.

The peso gained for the first time in three days after officials sold $411 million worth of options out of $500 million offered. The one-month contracts help relieve pressure on the peso by allowing buyers to lock in exchange rates.

“What we’ve seen in recent days is a strong volatility of the Colombian peso, more than other currencies in the region,” central bank chief Jose Dario Uribe said in an interview on Caracol Radio. The intervention is only intended to curb volatility, not to target a specific exchange rate, Uribe said.

The currency has weakened for three straight weeks and is down 37 percent in the past two years as the decline in prices for oil, Colombia’s biggest export, sapped economic growth and inflated the country’s currency account deficit to a record. The peso is still up 4.1 percent this year, the fourth-best performance among 24 emerging-market currencies tracked by Bloomberg, amid a rebound in crude prices.

The peso gained 0.3 percent to 3,048.9 per dollar at 12:36 p.m. in Bogota. The central bank last auctioned call options in 2009 as part of a program to reduce volatility.

Before it's here, it's on the Bloomberg Terminal.