Peru Central Bank Buying Dollars for First Time Since 2014by
Buys $55 million to force sol to close unchanged versus USD
Sol is Latin America’s less volatile currency in last year
Peru’s central bank bought dollars in the local currency market for the first time in almost two years to stem a rally in the sol.
The bank purchased $55 million for an average of 3.298 soles each, according to data on its website. The sol closed unchanged at 3.3 per dollar Wednesday after rising as much as 0.8 percent, according to prices from Datatec.
The sol, traditionally one of Latin America’s least volatile currencies, has soared 2.4 percent this month amid a rally in emerging-market assets and on speculation presidential elections held June 5 would usher in an investor-friendly government. Peru’s central bank has a history of intervening in the market to curb outsize swings, according to Pedro Tuesta, an economist at 4Cast.
"The central bank’s policy is to eliminate volatility," Tuesta said. "The bank has also been concerned about the effect that a stronger sol could have over its exports."
The last time that the central bank intervened by buying dollars was on Aug. 15, 2014, when it bought $10 million. Since then, it has sold dollars to avoid a depreciation of the local currency, auctioning in total $12.1 billion, according to data on its website.
The sol’s historical volatility over the past year has been the lowest among major Latin American currencies.