Dollar: Why its value is falling in Colombia and the world – Financial Sector – Economy

The new drop in inflation for USA in December, the sixth in a series that left it at 6.5 percent, the lowest since October 2021, led to a good part of the currencies strengthening against the dollar.

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In Colombia alone, the peso appreciated 1.2 percent, one of the biggest advances among emerging currencies, standing at 4,692.04 pesos for today, Friday.
The Brazilian real, For its part, it advanced 1.98 percent, the Mexican and Chilean pesos each gained 0.6 percent on Thursday.

The Colombian peso managed to lose more than 92 pesos this Tuesday against the representative market rate (TRM) of that day of 4,748.54 pesos.

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“The inflation data from the United States was not a surprise, it was expected and generated quite important market movements against and in favor of risk assets, which include the Colombian peso, which was quite misaligned compared to what was the end of the year ( 2022) in other Latin American currencies that had been revaluing a bit,” he said. Camilo Pérez, Director of Economic Research at Banco de Bogotá, who explained that what happened yesterday positioned the peso as the highest earning currency in the world against the dollar.

The rise of the peso yesterday left the Colombian currency at levels not observed since mid-October last when the exchange rate was located at 4,636.83 pesos.

However, this behavior may not last long because the current economic situation, added to strong expectations of a slowdown this year, continue.

To Juan David Ballén, director of Analysis and Strategy of the brokerage firm Casa de Bolsa, The inflation data in the United States (6.5 percent annually in December 2022) favors the performance of the dollar globally.

However, it cannot be forgotten that it is expected that the United States central bank, the Federal Reserve (Fed), raise its interest rate in the next two meetings, which added to fears of a recession, would once again strengthen the US currency globally, increasing the appetite for safe-haven assets.

The analyst adds that the dollar in Colombia is characterized by moving with great volatility both upwards and downwards, and the rebound it had in the first days of the year could have been explained by low liquidity given the end of the season. year.

However, he warns that the trading volume in the Colombian market has already been recovering and this has allowed the currency to adjust a little more to its real level. “The dollar had been falling throughout the region except in Colombia and what we have seen recently is an adjustment towards the level at which it was in the region, which is much lower”, Ballén points out.

Effect on other markets

But not only emerging currencies appreciated yesterday against the dollar. The euro also appreciated to over $1.08, after the release of US inflation figures, which slowed in December for the sixth consecutive month.

The US stock market and oil also rose due to a lower variation in the cost of living in that country. Wall Street closed yesterday in green and the Dow Jones Industrials, its main indicator, gained 0.64 percent in a positive reaction to the drop in inflation. For its part, the S&P 500 advanced 0.34 percent, while the Nasdaq, which groups the largest technology companies, rose 0.64 percent.

The Petroleum was no exception. Their prices rose again for the sixth consecutive day, driven, this time, by a weakening of the dollar that makes the barrel cheaper for investors in other currencies.

With the dollar weakened by a positive inflation indicator in the United States, the price of brent barrel North Sea for March delivery gained 1.64 percent to close at $84.03 in London.

While the barrel of West Texas Intermediate (WTI) for February delivery gained 1.26 percent to $78.39, the highest price in 2023.

In addition to the dollar, “the hope of an increase in demand in China” with the lifting of sanitary restrictions, also contributed to the escalation of crude oil prices, explained Robert Yagé, from Mizuho.


* With agency support

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