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15 May 2014
Latin America EM Express: Colombian peso falls after government announces it will restart dollar purchases
FXStreet (Łódź) - The Colombian peso was the biggest loser among emerging market currencies on Tuesday, following Finance Minister Mauricio Cárdenas's announcement that the government was planning to restart their dollar purchases in the face of the country's central bank's 1 billion dollar program drawing to an end.
“While the distinction may be a bit too fine for most observers, it simply underscores that policymakers remain very concerned about peso strength,” the BBH Global Currency Strategy Team suggest. “Cardenas believes that a 'competitive' exchange rate is a priority, and President Santos said this week that the 'ideal' exchange rate would be between 2000-2200.”
“But what did officials expect would happen to the peso when the central bank surprised the markets with a 25 bp hike to start the tightening cycle last month?”
Economic data
Argentinian CPI came in lower than expected in April, growing by 1.8% month-on-month, down from 2.6% in March, data released by the Instituto Nacional De Estadistic y Censos showed on Wednesday.
Colombia published annual Industrial Output numbers on the same day. The indicator jumped 9.8% in March, following a 2.8% increase in February and above forecasts of risisng 8%.
On Thursday Brazilian Retail Sales data surprised to the downside. On a monthly basis Retail Sales fell 0.5% in March, compared with the 0.2% increase in February and against consensus of +0.1%. Year-on-year it declined 1.1%, following a 8.7% rise and missing forecasts of 0.1% growth.
Technicals
On Tuesday the Colombian peso dropped 0.6% to 1923.80 against the greenback at the close of trading in Bogota. On Thursday USD/COP was up 0.4% at 1,930.02.
“While the distinction may be a bit too fine for most observers, it simply underscores that policymakers remain very concerned about peso strength,” the BBH Global Currency Strategy Team suggest. “Cardenas believes that a 'competitive' exchange rate is a priority, and President Santos said this week that the 'ideal' exchange rate would be between 2000-2200.”
“But what did officials expect would happen to the peso when the central bank surprised the markets with a 25 bp hike to start the tightening cycle last month?”
Economic data
Argentinian CPI came in lower than expected in April, growing by 1.8% month-on-month, down from 2.6% in March, data released by the Instituto Nacional De Estadistic y Censos showed on Wednesday.
Colombia published annual Industrial Output numbers on the same day. The indicator jumped 9.8% in March, following a 2.8% increase in February and above forecasts of risisng 8%.
On Thursday Brazilian Retail Sales data surprised to the downside. On a monthly basis Retail Sales fell 0.5% in March, compared with the 0.2% increase in February and against consensus of +0.1%. Year-on-year it declined 1.1%, following a 8.7% rise and missing forecasts of 0.1% growth.
Technicals
On Tuesday the Colombian peso dropped 0.6% to 1923.80 against the greenback at the close of trading in Bogota. On Thursday USD/COP was up 0.4% at 1,930.02.