Dollar: what is the reason for its ups and downs in recent days

(Read: The consequences of the abrupt fall of the pound against the dollar).

Experts agree that this volatility is the product of a panorama of uncertainty that exists both locally and internationally.

For Juan Eduardo Nates, Senior Currency Associate at Credicorp Capital, these movements have been influenced since September 21, when the United States Federal Reserve (FED) decided raising interest rates in the country by 75 basis points.

“Although the market expected this rise, what they had not been expecting was such a strong reaction from the interest rate marketsNate explains.

The expert acknowledges that this uncertainty in the face of the FED’s decisions means that fixed-income assets, specifically those of the United States Treasury, begin to raise rate expectations.

On the other hand, the forecasts of the analysts is that at the end of the year there will be an increase in at least 150 basis points in rates.

With this, the fixed income markets adjust their forecasts. Namely, “United States bonds begin to adjust and operate at 3.95%“, points out the expert.

(Also: Euro falls to new 20-year low after swing to the right in Italy.)

According to Nates, these rates serve as a reference for all portfolios in the world. Especially those that are handled in dollars. That is why investment funds are protected in lower-risk assets with higher rates and investment flows out of emerging marketslike the Colombian.

The expert explains that this rise is taking place not only in the Colombian peso, but in all currencies with respect to the dollar.

In turn, it is being generated that those who buy oil also have to pay much more when converting their currencies to dollars. In this sense, the currencies of the region that have been affected are those of Mexico, Chile, Brazil and Colombia.

Regarding whether the dollar would return to the rise, after this Wednesday low, it is possible that it would. According to the expert, this would happen while the oil is finished recovering. For example, with the measures taken byr the Organization of Petroleum Exporting Countries and its allies (Opec +) on the cut in barrels per day.

However, he acknowledges thatthe 4,500 pesos begin to reflect rising United States treasures that are going to stay, at least, until the next inflation data“, He says.

(Keep reading: Potato, meat, beer: this is how inflation affects their prices).

Until oil prices are regulated and there is more clarity about how it is going to end the Fed rate hike, the Colombian peso will continue to oscillate at that price, Nates pointed out.

Likewise, the situation is aggravated in the country with the effects of double-digit inflation and the impacts are felt in the food prices. Many of them that are produced with imported goods.

“It is very difficult for the dollar to go down while it is maintaining a general strength because the assets of the region begin to have that attractionsaid the expert.

Although last Tuesday the dollar positioned above 4,550 pesos, this has not been the highest figure in its history or in the year regarding the Representative Market Rate (TRM). The record is in the TRM of the past July 13, 2022, which was $4,627.46. It is followed by that of the 14th of the same month ($4,558.05).

That of Wednesday, September 28 ($4,556.42) continues. Then the one for July 15 ($4,519.65) and the one for July 12 ($4,513.28).

(See: Dollar in Colombia fell 71 pesos and is below $4,500).

Then comes the one from last Tuesday, September 20 ($4,496.99) and the one that will govern this Thursday, September 29 ($4,486.94).

Followed by that of September 7 ($4,480.10), September 2 ($4,4767.03) and closing the ‘top’ of higher TRM that of September 3, 4 and 5 ($4,466.73).

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