Colombia Peso Gains on European Plan Optimism, U.S Retail Sales

Colombia’s peso rose, posting its biggest weekly increase since February 2.010, on optimism European leaders will reach an agreement to contain the region’s debt crisis and as a higher-than-forecast increase in U.S. retail sales eased concern the world’s biggest economy may relapse into recession.

The peso gained 0.8 percent to 1,886.10 per U.S. dollar, from 1,901.03 yesterday. 

The currency jumped 2.6 percent this week, its biggest advance since the period ended Feb. 12, 2.010.

“Speculation on the European rescue plan for now should continue to drive appetite for risk,” said Felipe Campos, head analyst at Alianza Valores SA brokerage in Bogota. Still, “investors are being cautious and while they are buying emerging market assets, demand isn’t strong.”

Elements of the European rescue plan emerged as finance ministers and central bankers from the Group of 20 began talks in Paris. 

The aim is to craft what the French and German governments call a “durable” fix to the turmoil that has propelled Greece to the edge of default and is rattling global markets.

Sales in the U.S. rose 1.1 percent in September, more than the 0.7 percent median forecast in a Bloomberg survey, easing concern slumping confidence and scant hiring will derail the biggest part of the economy. 

The U.S. is Colombia’s biggest trading partner, buying about 40 percent of the South American nation’s exports.

In a bid to ease the peso’s “extreme volatility,” Colombia’s central bank said Sept. 30 it will auction $200 million in the spot market when the exchange rate moves more than 2 percent above or below its 10-day moving average starting today.

The yield on Colombia’s benchmark 10 percent bonds due in July 2.024 rose three basis points, or 0.03 percentage point, to 7.48 percent. 

It fell 10 basis points this week. 

The bond’s price fell 0.232 centavo to 120.221 centavos per peso.