The currency fell 2.68% against the sol, from S$3,807 in 2022 to S$3,705 this year, despite recession in which the country is immersed.
The evolution of the exchange rate has been largely marked by Fed decisions.. Thus, the continuous increase in interest rates since March 2022 has led to an increase in the price of the dollar in the first two months of this year. After this, the market began to speculate on the end of the cycle of increasing this rate, which caused a decline in the US currency in the period from March to July 2023.
However, market concerns about the Fed tightening policy in its messages, which mentioned the possibility of another rate hike, lifted the dollar between August and October. However, the US central bank has since toned down its preaching and in December more openly hinted at a key rate cut in 2024, weakening the strength of the dollar (it fell from S/3.84 in October to the current S/3705). ).
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How will the dollar fluctuate in 2024?
In 2024, the exchange rate of the American currency will also largely depend on the plans of the Federal Reserve, although movements Central Reserve Bank of Peru (BCRP) .
As such, downward pressure on the dollar will continue into the early part of the new year, with prices close to S/3.60 in the first quarter, according to company executives. Financial system.
The dollar could then recover to S/3.75 or S/3.80 as the spread between US and Peruvian central bank interest rates narrows.
However, the dollar will resume its bearish bias in the second half of the year and end 2024 at S/3.70 due to the Fed rate move and a favorable dollar price. copperaccording to executives.
Other treasury managers take a different view, believing the US currency could fall to S/3.68 in January. But with the BCR cutting its interest rate later that month and possibly February, foreign exchange could recover to S/3.70 or S/3.75 by March, they forecast.
Later, between March and June, the Fed will start cutting rates, so according to this sector of the market, the dollar will trend lower and be around S/3.65 by the end of 2024.
READ ALSO: The dollar recovers to S/3.79. Will it continue to rise after the Fed’s announcements?
BCP and BBVA and dollar forecasts next year
In turn, the head of economic research BCPCarlos Prieto forecasts the currency will fluctuate between S/3.70 and S/3.80 through 2024, depending on the difference between Fed and BCR interest rates and the country’s trade surplus.. The latter will benefit from good copper price prospects, he notes.
At the same time, according to analysts, in 2024 the exchange rate will close at S/3.75.
In the Antipodes the chief economist BBVA ResearchHugo Perea claims that next year the dollar will move between S/3.85 and S/3.95. because the difference between interest rates in the United States and Peru will narrow, making investments in foreign currency-denominated instruments more attractive.
READ ALSO: Capital flight from Peru increases due to uncertainty and lack of investment
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