THE COLOMBIAN peso has seen the biggest drop in an emerging market currency this week after an announcement made by Finance Minister Mauricio Cardenas. Cardenas said the government was to begin using its own money to buy dollars as a $1billion USD intervention programme by the central bank ran out of money.
The currency fell 0.35% to $1,820.40COP to the US dollar at close of trade on Wednesday May 14, its fourth consecutive decline. The peso was at a six month high on May 8, at $1,900.90COP, but has since fallen over 4%.
Colombia’s central bank has been buying dollars for the last two years, to boost exports by keeping the peso weak.
Cardenas said on Twitter on May 14 that the government would continue with its policy of currency intervention “in so far as it is necessary” and declined to give further details on the time period or amount of money to be spent on the policy.
The peso has been growing stronger since JP Morgan announced in March it was considering raising Colombia’s weighting in two emerging-market bond indexes. At the time Colombia’s central bank said they would continue intervening in foreign exchanges to prevent further peso gains. So far this quarter they have spent $430 million USD on dollar purchases and bought $600 million in the first quarter of the year.
In an interview with RCN Radio, President Santos said he considered the “ideal” exchange rate to be $2,000 to $2,200 COP to the dollar.