Is it a good time to invest in euros in Colombia?

It is known that the American dollar has had a significant decrease with respect to the Colombian peso, to the point that it consolidated below the 4,200 pesos.

And the eurothe second benchmark currency in the international market, has not been oblivious to this situation with respect to the national currency, since this currency went from being above 5,000 pesos, in the month of May, to trading in figures around 4,550 pesos.

(The euro consolidates as the second most important currency in the world).

“The value of the euro against the Colombian peso depends on two variables in the market. On the one hand, the US dollar against the Colombian peso and, on the other, the euro against the dollar.“, as he explains Alejandro Guerrero, foreign exchange associate at Credicorp Capital to ‘Bloomberg Line’.

And it is that, so far this year, the Colombian peso it has appreciated by 13.15% against the dollar so far this yearthis being the best behavior of the currency compared to the other countries in the region, which has also had a direct influence on its price against the euro.

The factor of the euro’s price with respect to the peso, as well as the dollar, is mainly due to international factors such as the behavior of the market, but with regard to the economy of the euro zone (the countries where the currency is the main currency), one of the factors that has affected the price compared to other currencies has been interest rates.

(Euro zone annual inflation fell to 6.1% in May).

Despite the fact that the variation in consumer prices in the euro area has a downward trend, registering the data for May at 6.1%, the European Central Bank (ECB) made the decision on June 14 to continue raising its interest rates by 25 basis points, placing them at 4 %. And he already warned that he will continue in that line

“The European Governing Council is determined to ensure that inflation returns to its medium-term target of 2% soon. Consequently, it has decided to raise the three official interest rates“, said Christen Lagarde, President of the European Central Bank.

(ECB interest rate hikes to continue into July).

Colombian peso

TIME

According to the expert, as most of the international negotiations are done in dollars, the offer and the demand The euro does not have as much weight as the US currency, despite having a higher monetary value and holding on with apparent strength.

(European Central Bank raised interest rates to 4%).

Given this, as the Colombian peso has been one of the emerging market currencies that has gained more strength compared to the dollar, This increase has also been reflected in its price with the European currency.

This has been due, as explained by the Director of Economic Research at Alianza Valores, Felipe Camposfor ‘Bloomberg Line’, to which “above all to the strength of the Colombian peso against the two currencies that are strong. And, between those two currencies, the euro has been marginally stronger than the dollar“.

As the analyst mentioned, we must be very aware of how the expectations of the peso improve with respect to the euro, because thus, the market can prepare for a reduction in the interest rate.

(The reasons why the Eurozone fell into recession).

“The euro can be a good investment option among the strong currencies, in the face of this competition. I think that the Latin American currencies are going to be stronger and they are going to continue to gain. Thinking of people who have investments abroad and who also diversify between strong currencies, the euro could be an interesting option considering that the rate against the dollar is close to 1.80 – 1.09% and for less than a year or two was at 1.20% – 1.30%”, he told ‘Bloomberg Line’.

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*With information from Bloomberg Line