Colombia’s Peso Leads Emerging Markets Rout on China Data

  • Other Latin American currencies fall after trade report
  • Delay in Colombia tax reform bill also affects sentiment

The Colombian peso slumped the most among major emerging market currencies after weak data from China pushed its peers lower and amid uncertainty over a local tax reform needed to stave off a potential sovereign credit downgrade.

The currency weakened 1.2 percent to 2,933.43 per dollar at 12:07 p.m. in Bogota, ending two days of gains. Year-to-date the currency has strengthened 8.2 percent after a 25 percent plunge last year amid a fall in oil prices. The Bloomberg JP Morgan Latin American Currency Index lost 0.4 percent, the most since Oct. 4.

China’s exports in September fell a faster-than-expected 10 percent from a year earlier, a sign that global demand remains tepid. The data pushed commodity prices lower earlier in the day, and emerging-market stocks also fell. The peso slid more than peers amid speculation President Juan Manuel Santos may lack the political support required to pass a tax reform that is key to increase fiscal revenue and avoid a potential downgrade of the country’s rating, according to Daniel Escobar, chief economist at Bogota-based brokerage firm Global Securities.

The government was supposed to send a bill for the tax reform this week and has now announced it will do so by next Tuesday, Escobar explained. "There’s doubt that the government will have support to pass an increase in the value-added tax," he said. "The perception is that if the reform doesn’t come out good, we’ll have a downgrade next year."

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