Colombian Peso Gains for Second Day on Oil, Appetite for Yield

Colombia’s peso rose for a second day amid gains in oil, the nation’s biggest export, and as signs that the Federal Reserve and Bank of Japan will stimulate growth buoyed demand for higher-yielding assets.

The peso advanced 0.6 percent to 1,777.21 per U.S. dollar, extending its gain this year to 9.1 percent, the best performance among the six most traded Latin American currencies.

“Oil has been rebounding, which implies greater flows into Colombia,” said Omar Escorcia, an analyst at Asesores en Valores SA brokerage in Bogota. “

Greater appetite for risk is reflected in gains in Latin American currencies, including the Colombian peso, and also in shares that are viewed as riskier.”

Global stocks rose and oil advanced after Fed Vice Chairman Janet Yellen and Fed Bank of New York President William C. Dudley endorsed the central bank’s view that borrowing costs are likely to stay low through 2.014. 

The Bank of Japan (8301) will pursue “powerful easing” to overcome deflation, central bank Governor Masaaki Shirakawa said today. Oil accounts for about 40 percent of Colombia’s sales abroad.

Colombian Finance Minister Juan Carlos Echeverry has said the peso has reached a “worrying” level and that the central bank should consider boosting dollar purchases and study possible “surprise” moves to halt the currency’s advance.

In comments to lawmakers this week, Echeverry said both the government and the central bank want to avoid job losses stemming from the peso’s rally and that Colombia needs to consider “all the alternatives.”

Banco de la República has said it will purchase a minimum of $20 million daily in the spot market until at least Aug. 4 in a bid to stem gains in the local currency.

The yield on Colombia’s 10 percent peso-denominated debt due in July 2.024 rose three basis points, or 0.03 percentage point, to 7.13 percent, according to the central bank. 

The price fell 0.282 centavo to 122.906 centavos per peso.