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Colombia’s peso rose to a two-month high as local banks reduced dollar holdings and on speculation increased foreign investment into the South American country will boost gains in the currency.

The peso climbed 0.4 percent to 1,899.50 per U.S. dollar at 9:47 a.m. in Bogota, from 1,906.97 yesterday. 

Earlier it touched 1,898.90, its strongest level since Nov. 3. 

The peso has jumped 2.1 percent so far this year.

At the end of 2.011, banks in Colombia increased the amount of dollars they hold after the central bank’s daily dollar purchases in 2.010 depleted cash holdings of the U.S. currency, pushing the peso to plunge to a seven-month low.

“With the start of the new year banks noticed they are holding more dollars than they need,” said Juan Nicolas Garcia, a currency trader at HSBC Holdings Plc’s Colombia unit. 

Foreign direct investment “remains very strong, and so the peso will continue with its strengthening trend.”

Foreign direct investment probably rose to a record $13 billion in 2.011, President Juan Manuel Santos said last month.

While 1,900 is a “difficult level to break,” the peso will likely strengthen to 1,880 this month, Garcia said.

The yield on the nation’s 10 percent bonds due in July 2.024 fell one basis point, or 0.01 percentage point, to 7.56 percent, according to the stock exchange. 

The bond’s price rose 0.114 centavo to 119.235 centavos per peso.