These days, the price of the dollar in Colombia has given rise to the strengthening of the Colombian peso, which allowed the US currency to trade at levels close to $ 3,700, but two months after hitting $ 4,000.
However, the depreciation of the local peso is still high compared to the price that started the year on January 1, which was $ 3,432.
(The dollar in Colombia continues to weaken against the peso).
As of October 13, the foreign currency is trading at $ 3,726, which means that, so far in 2021, the US currency has won $ 294.
According to the history of the Banco de la República on the Market Representative Rate (TRM), The maximum price of the dollar this year was negotiated on August 10, when it reached $ 3,988, and the minimum was on January 7, when the TRM stood at $ 3,428.
According to market analysts, the X-ray showing the exchange rate close to $ 3,700 is due to a series of factors beyond concern about the pandemic, which has already had a slight impact on its behavior.
According to experts, the exchange rate in Colombia today is regulated by a series of monetizations that the Ministry of Finance has done for the sale of ISA, the expectations due to the forthcoming presidential elections next year and the inflow of capital due to a return of appetite for risk of foreign investors, factors that have favored the Colombian peso, despite the fact that the world has seen a significant strength of the dollar.
(Colombian peso added another day of profit against the dollar).
Felipe Espitia, senior economist at Banco Popular, explains “What we are seeing with the depreciation of the dollar at the moment is thanks to the issue of monetization carried out by the Ministry of Finance, which had a significant box in dollars for the sale of ISA and for the special rights of the transfer received in exchange for TES securities by the Issuer “.
He also adds that although there is currently a downward trend of the dollar in the local market, it is necessary to see if this marks a roadmap for the end of this 2021, understanding that the effect of ‘ the decisions of the Fed, By tightening its monetary policy a little earlier than expected, it will lead to a rebound, which would cause the exchange rate to rise again a bit.
For his part, Munir Jalil, director of economic research for the Andean region of BTG Pactual, states that at present the market sees a return of appetite for risk from foreign investors.
(Dollar in Colombia: what’s coming next months?)
“We started from an October that looked complex but started to improve and showed some more optimism in the markets”he told Portfolio.
He added that, however “We can not say that this will continue, because there are volatility factors. To the extent that a new variant such as another peak of the pandemic arrives at the end of the year, that may play a small role, as if the US debt crisis returns, this may generate some divergence to risk and demand for the dollars ”.
Jalil confirms that it is a good time for those who want to buy dollars, since “We are close to the right price to buy. Volatility will not go away, other factors may appear before the end of the year that it will rise, but we are on the side of $ 3,700 or $ 3,760 pesos.”.
It has been earning the dollar in Colombia since January 1 of this year.
For his part, Diego Franco, CIO of Franco Capital Management LlC, points out that the recovery that the Colombian peso has undergone as the ‘rest’ of the dollar is due to specific factors of capital inflows.
“At that point, the best panorama that Moody’s offers for Colombia is highlighted, which led to foreign funds deciding to increase their participation in the country. In general, it is thanks to the best growth forecasts for the Colombian economy “Franco added.
“Even the International Monetary Fund yesterday improved its growth forecasts for the country for 2021 and 2022 yesterday and that has somehow generated temporary confidence among foreigners”, said the analyst.
However, he does not think that trend will continue for long.
“It will not continue, not because Colombia has collapsed, but simply because capital inflows will be smaller in the short term. Also because there are tensions and uncertainties at the international level: the issue of inflation in the US has created a very important echo, including global macroeconomic aspects, which will lead the markets to seek refuge in the dollar “.
Finally, Espita draws attention to another factor to take into account in the future the exchange rate, which has to do with the presidential elections in Colombia in 2022.
“We continue to believe that the whole issue of elections in Colombia will bring a floor of $ 3,300 or $ 3,350 to the exchange rate, which is a short-term event that we need to resolve in order to have a better clarity on what is in the future for the country. ”.