Colombian Peso Declines on Bets for Further Currency Measures

Colombia’s peso fell, erasing an earlier advance, on bets policy makers will take further measures to ease gains in the local currency.

The peso fell 0.2 percent to 1,784.15 per U.S. dollar at 12:57 p.m. New York time, from 1,780 yesterday.

Today’s drop pared the peso’s gain this year to 7 percent, the best performance among the most traded Latin American currencies.

“The market gets nervous when the peso gets closer to 1,750 on speculation the central bank will take further measures, and the exchange rate will turn around pretty fast,” said Jose Luis Alayon, an analyst at Bogotá based brokerage Acciones y Valores SA.

In a bid to ease the peso’s rally, Finance Minister Juan Carlos Echeverry said in April that the government would create an overseas fund with as much as $1.2 billion from dollars bought in the local market through the end of 2011, and forgo repatriating funds from abroad for the rest of the year.

Since Sept. 15, the central bank has bought a minimum of $20 million daily in the currency market, and plans to keep up the purchases until at least Sept. 30.

Banco de la República will probably extend its daily purchases through the end of the year, said Alayon.

Foreign Borrowing

Andres Pardo, the head analyst at financial services holding company Corp.

Financiera Colombiana, known as Corficolombiana, expects policy makers to impose limits on foreign borrowing as part of an effort to stem peso gains.

The Colombian currency earlier rose as much as 0.2 percent on bets the Federal Reserve will take steps to bolster the U.S. economy, according to Po Jeng, an analyst at Interbolsa SA, Colombia’s biggest brokerage.

Central bankers from around the world meet this week in Jackson Hole, Wyoming, for a conference that last year resulted in Fed Chairman Ben S. Bernanke signaling a second round of asset purchases that buoyed equity markets.

The yield on Colombia’s 10 percent bonds due in July 2.024 rose four basis points, or 0.04 percentage point, to 7.33 percent.

Yesterday the yield fell to 7.29 percent, its lowest level on a closing basis since the bonds were issued in 2.009.

The price fell today 0.380 centavo to 121.792 centavos per peso.