Colombia Peso Weakens as Fed Damps Speculation on Further Easing

Colombia’s peso fell after the Federal Reserve’s improved assessment of the U.S. economy reduced speculation it will begin a third round of bond buying that would further depreciate the dollar.

The peso fell 0.1 percent to 1760.65 per U.S. dollar at 11:53 a.m. in Bogotá, from 1758.15 yesterday. 

The currency has jumped 10 percent this year, the best performance among 25 emerging-market currencies.

Most emerging-market currencies weakened today after the Federal Open Market Committee said yesterday it expects “moderate economic growth” and predicted the U.S. unemployment rate “will decline gradually.” 

The comments reduced speculation the central bank will undertake so-called quantitative easing to stimulate the world’s largest economy.

“The improved outlook for the U.S. economy makes the dollar stronger compared to other currencies and it has affected the move in Colombia’s peso today,” said Daniel Escobar, head analyst at Global Securities brokerage in Bogotá. 

“We’re simply following the international trend.”

The Brazilian real declined 1.3 percent to 1.8149 per U.S. dollar, the most among major Latin American currencies.

The yield on Colombia’s 10 percent peso-denominated debt due July 2.024 rose six basis points, or 0.06 percentage point, to 7.25 percent, according to the central bank. 

That’s the biggest gain on a closing basis since Dec. 6. 

The price fell 0.592 centavo to 122.845 centavos per peso.

Bond Auction

Yields on Colombian peso bonds fell at a government auction of fixed-rate securities today.

The yield on the bonds due August 2026 fell to 7.42 percent from 7.61 percent at the last auction on Feb. 22.

Colombia also sold bonds due October 2.018 to yield 6.8 percent, down from 6.93 percent previously, and auctioned notes due in June 2.016 to yield 6.48 percent, the Finance Ministry said in a statement.

Investor demand for the fixed-rate securities totaled 1.32 trillion pesos ($747 million), more than 3 times the 400 billion pesos of debt offered, the ministry said in the statement.