Dollar: ‘The multiplying factor of volatility is uncertainty’

One of the characteristics of the behavior of the dollar in Colombia is its high volatility. From November to April, the US currency has moved in a price range between $5,000 and $4,500, with strong daily ups and downsmarked by internal and external factors, including the decisions of the Fed, the banking crisis, fears of recession and, in Colombia, expectations for structural reforms, among other issues.

(Would it be possible to have a dollar at 4,000 pesos or less?).

For Juan Eduardo Nates, senior foreign exchange associate at Credicorp Capital, the volatility observed in recent months is the only certain thing at the moment and it is expected to continue as long as fears about the global and local economy continue.

“The multiplying factor of the volatility of the dollar is uncertainty”, The expert pointed out in a Portfolio Live, in which he also stated that the downward pressures that the foreign currency is registering these days, and that keep it close to $4,500, are due more to the generalized weakness of the dollar, than to the strengthening of the Colombian peso.

(Where is the dollar going? Forecasts of what is coming for the currency).

According to Nates, if the market removed the effect of uncertainty, the dollar in Colombia would remain stable. However, as fears persist, investors are torn between buying and selling, a situation that produces volatility.

“Since last June, when Petro was emerging as the president of Colombia, investors began to debate between buying and selling, since just as there are aspects that produce fear, there are those who see an opportunity. This has been the constant and is what causes the volatility that we observe today”, noted the expert.

“Without a doubt, volatility will continue if the government communicates as it does and fears persist,” he concludes.

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