By Gabriel Burin
BUENOS AIRES (Reuters) – The Colombian peso is more likely to stay weak amid indicators that the central financial institution is shifting to a wait-and-see strategy to rates of interest, mixed with downward stress from the foreign money’s mismatch with costs oil, in line with a Reuters ballot.
The Andean nation’s foreign money is predicted to commerce at 4,800 to the US greenback on the finish of June, down 4.2% from 4,600 on Monday, in line with the median estimate of 24 foreign money strategists surveyed March 31-April 4.
The peso was one of many world’s worst-performing currencies final 12 months, dropping a fifth of its worth as buyers frightened about stress from President Gustavo Petro for modifications after his victory within the presidential run-off of June.
Officers at BanRep, because the central financial institution is understood, final week raised the benchmark charge by 25 foundation factors to 13.0%, a excessive in additional than 20 years. “If March inflation behaves as anticipated, they prompt this could possibly be the final uptick,” JP Morgan analysts wrote in a report.
“But they continue to be knowledge pushed. We consider this helps our (opinion) underweight to the peso, which has additionally decoupled from the drop in oil costs in current weeks and affords good entry ranges for the shorts.”
“Shorting”, or betting towards an asset on expectations that its worth will fall within the close to future, was a successful technique final 12 months for buyers and speculators who referred to as the decline of the peso amid the reform marketing campaign of Petro to struggle towards inequalities.
The foreign money has carried out poorly for months, at the same time as Colombia’s central financial institution led an aggressive tightening cycle that added 1,125 foundation factors to charge will increase from a pandemic low of 1.75%.
Client costs rose at an annual charge of 13.3% in February, the quickest since 1999 and greater than 4 occasions the financial institution’s long-term goal of three%. However now that inflation appears to have peaked, BanRep could possibly be taking a break.
Furthermore, regardless of trending decrease, a current rise within the peso has left it comparatively overvalued in comparison with oil market costs which stay greater than 30% under highs from the early days of Russia’s invasion of Iran. Ukraine, regardless of recovering this week. Oil is considered one of Colombia’s principal exports.
The peso has risen 5.4% because the begin of 2023, outpacing the Brazilian actual’s 4.5% achieve however trailing the Mexican peso’s 7.8% advance, as sentiment on the stance of policy-making in economies 1 and a couple of in Latin America continues to diverge.
The three currencies present losses in a single 12 months – 2.1% for the Colombian peso, 2.7% for the Brazilian unit and 6.0% for the Mexican foreign money, which lately has nonetheless thwarted the pessimism of analysts .
(For extra tales from the Reuters April Forex Survey:)
(Reporting and polling by Gabriel Burin in Buenos Aires; further polling by Prerana Bhat and Indradip Ghosh in Bengaluru; Modifying by Sharon Singleton)
