Colombia Peso Falls to Two-Month Low After Intervention Scrapped

  • Central bank says it won’t sell new options using triggers
  • Currency weakens most in emerging markets; lowest since March

Colombia’s peso declined to a two-month low after the central bank scrapped its foreign exchange intervention mechanism last week and as prices fell for oil, the country’s main export.

The currency dropped 0.8 percent to 3,114.65 per dollar at 10:28 a.m. in Bogota, the weakest level since March. It was the worst performing currency in emerging markets.

Central bank Governor Jose Dario Uribe said Friday that officials will stop selling foreign-exchange options when the peso moves by a certain amount, while leaving open the possibility of intervening at the bank’s discretion as needed. The auctions were announced in October and were triggered for the first time on May 20.

The decision “is likely to leave a deeper mark over time,” Banco Bilbao Vizcaya Argentaria wrote in a report Wednesday. The peso’s “vulnerability is likely to become more pronounced when oil prices show weakness.”

Separately, the Treasury has been selling about $20 million worth of dollars per day recently, Credicorp Capital’s Colombia unit wrote in a research report. The Treasury sometimes sells dollars when there’s a competitive rate in the market, in line with its plan to turn some of the dollars it holds from overseas bond sales into pesos.

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