What has been happening with the rise of dollar in Colombia It has to do with mixed signals in the financial markets. In particular, with the brake on the decline in inflation in Colombiathe future of interests in USA and the echoes of the presidential election in Mexico.
The Representative market rate (official dollar) today is $4,107.52, $84.26 higher than Thursday, and the devaluation of the peso this year is 7.47%. This year it has risen $285.47.
(You can read: The dollar in Colombia does not find a ceiling and has already exceeded 4,100 pesos).
However, analysts say that the exchange market in Colombia has been going against other countries in the region.
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According to Édgar Jiménez, professor of finance and the Financial Laboratory of the Jorge Tadeo Lozano University“As the market calms down, the rate could fall below $4,000 again.”.
(You can read: The impact that stagnant inflation would have on lowering rates).
The academic considered that in the short term the behavior of the currency price would be a little downward, “around $3,950, although in the long term the trend is upward and the decreasing inflation in the US would lead to a decrease in the coming months”. Another seasonal effect, although of a more limited magnitude, it has to do with the impact of the rise of the greenback in the holiday season.
Jackeline Piraján, economist at Scotiabank Colpatriasays what he is seeing is a negative reaction to Mexico’s elections 12 days ago.
“After that, the exchange rate in Colombia has depreciated a little more than 5% and we went from operating from a level of $3,850 to a level closer to $4,000 and $4,100 pesos per dollar. Added to the above is the expectation to know the approaches of the Medium Term Fiscal Framework (MFMP)“, that he Treasury will present this Friday, said the economist.
(You can read: Preventive blocking of spending: what the Government can do and what it cannot do after this decision).
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The analyst also sees that “This movement would not possibly substantially affect the decisions of Colombians who decide to travel abroad in the short term, because we assume that those plans were made weeks ago, perhaps months ago, when we had a somewhat more stable exchange rate, which is why large expenses such as air tickets, accommodation and tourist plans could have been made with a lower dollar”. Thus, the impact could be felt in unforeseen expenses.
He assured that given the feeling of regional uncertainty, part of the movement in the dollar is structural, that is, it is not expected that “decrease significantly again in the short term, because in addition to the elections in Mexico, the announcement of the MFMP is expected”.
(Also: After defeat in the European elections, Macron announced early elections in France).
For Scotiabank Colpatria, the fair value of the exchange rate, macroeconomically speaking, should be a dollar ranging between $4,000 and $4,100 per dollar.
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And taking advantage of the cheap dollar in previous months, several companies made exchange hedges and it is likely that in the short term the effect of this depreciation on prices will not be felt. and that the benefits of coverage continue to be seen at times when you want to avoid volatility.
Gabriela Bautista, external context analyst at Corficolombiana, says that after the Mexican elections, the optimism about Colombian assets in recent months was broken; “and rather the peso would already be incorporating in a more transparent manner the idiosyncratic risks of the deterioration of local macroeconomic fundamentals, which the risk premium had been reflecting.”
(Also: Unexpected swing in bank assets is boosting the bond market.)
Particularly, on the verge of knowing the Medium-Term Fiscal Frameworkthe markets seem to reflect a greater aversion to risk among foreign investors, since it is estimated that this year it will not be possible to comply with the fiscal rule.
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“We consider that the adjustment of $20 billion announced last week will be insufficient to guarantee the sustainability of public finances“, said.
Different moments in the reduction of Issuer rates
For Corficolombianit is expected that the carry trade (investment in local currency that after a period of time produces a profit in foreign currency) will begin to reduce, while the Bank of the Republic continue lowering your interest rate (despite caution).
In the US Federal Reserve There is no confidence that rates will begin to fall this year. And in the context of fiscal risks and economic deterioration, which is reflected in lower tax collection, an exchange rate is seen that seems to incorporate the winds of depreciation that have been announced since the beginning of 2024 and that could deepen.
HOLMAN RODRÍGUEZ MARTÍNEZ
Portfolio Journalist
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