Post by Sapphire Capital on Jul 12, 2008 23:18:01 GMT 4
Colombia's Peso Jumps to 9-Year High on Rate-Rise Speculation
June 3 -- Colombia's peso jumped to a nine-year high after consumer prices rose more than economists forecast in May, adding to speculation the central bank will raise interest rates as soon as this month.
The peso climbed as much as 1.3 percent today following a June 1 report that showed the monthly inflation rate soared to 0.93 percent in May, more than double the 0.4 percent median forecast. Colombian markets were closed yesterday for a national holiday.
The peso gained 1 percent to 1,729.25 per U.S. dollar at 4:50 p.m. New York time, from 1,747 on May 30, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX. The currency earlier reached 1,725.15, the strongest since June 30, 1999.
Increased foreign direct investment and the widening gap between U.S. and Colombian benchmark rates have fueled a 16.7 percent rally in the peso this year. The 7.75 percentage point difference between U.S. and Colombian benchmark rates is the widest since July 2001.
Banco de la Republica last month left the key rate at a six- year high of 9.75 percent. Campos forecasts the bank will raise the key rate to 10 percent at its June 27 meeting, leaving it there through year-end.
In a bid to slow the five-year, 65 percent rally in the peso, the government last week strengthened capital controls.
The government raised deposit requirements on new portfolio investment in the country, such as the purchase of bonds and stocks, to 50 percent from 40 percent. Multinationals will also be required to keep foreign direct investment in Colombia for a minimum of two years, the Finance Ministry said in a May 30 statement.
Bond yields soared today as investors increased bets on higher rates. The yield on benchmark 11 percent government bonds due July 2020 rose 28 basis points, or 0.28 percentage point, to 11.66 percent, according to Colombia's stock exchange. The bonds' price dropped the most since Jan. 21, falling 1.753 centavo to 95.731 centavos per peso.
Colombia's annual inflation rate jumped to a four-year high of 6.4 percent in May, exceeding the central bank's 3.5 percent to 4.5 percent inflation target range.
June 3 -- Colombia's peso jumped to a nine-year high after consumer prices rose more than economists forecast in May, adding to speculation the central bank will raise interest rates as soon as this month.
The peso climbed as much as 1.3 percent today following a June 1 report that showed the monthly inflation rate soared to 0.93 percent in May, more than double the 0.4 percent median forecast. Colombian markets were closed yesterday for a national holiday.
The peso gained 1 percent to 1,729.25 per U.S. dollar at 4:50 p.m. New York time, from 1,747 on May 30, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX. The currency earlier reached 1,725.15, the strongest since June 30, 1999.
Increased foreign direct investment and the widening gap between U.S. and Colombian benchmark rates have fueled a 16.7 percent rally in the peso this year. The 7.75 percentage point difference between U.S. and Colombian benchmark rates is the widest since July 2001.
Banco de la Republica last month left the key rate at a six- year high of 9.75 percent. Campos forecasts the bank will raise the key rate to 10 percent at its June 27 meeting, leaving it there through year-end.
In a bid to slow the five-year, 65 percent rally in the peso, the government last week strengthened capital controls.
The government raised deposit requirements on new portfolio investment in the country, such as the purchase of bonds and stocks, to 50 percent from 40 percent. Multinationals will also be required to keep foreign direct investment in Colombia for a minimum of two years, the Finance Ministry said in a May 30 statement.
Bond yields soared today as investors increased bets on higher rates. The yield on benchmark 11 percent government bonds due July 2020 rose 28 basis points, or 0.28 percentage point, to 11.66 percent, according to Colombia's stock exchange. The bonds' price dropped the most since Jan. 21, falling 1.753 centavo to 95.731 centavos per peso.
Colombia's annual inflation rate jumped to a four-year high of 6.4 percent in May, exceeding the central bank's 3.5 percent to 4.5 percent inflation target range.