Peru’s sol slid to a nine-month low, raising the possibility that the central bank may intervene to strengthen the currency, according to economists at Banco Bilbao Vizcaya Argentaria SA and Nomura Holdings Inc.
Peru’s sol posted its steepest weekly decline in a month as the central bank boosted dollar purchases to offset rising inflows into the country.
Yields on Peru’s benchmark bonds due in 2020 fell as investors bought the securities on a bet the currency will appreciate as companies sell dollars to make tax payments.
Peru’s sol depreciated for the first time in four days after the central bank bought dollars to stem gains in the local currency.
Peru kept borrowing costs unchanged for the 18th consecutive month as policy makers said economic growth is near its potential and inflation is slowing to the mid-point of their target range.
Peru’s central bank probably will keep borrowing costs unchanged for the 18th consecutive month today after taking steps to stem a rally in the sol and restrain credit demand.
Peruvian monthly inflation slowed in August after increasing at the fastest pace in three years the previous month, as the lower cost of imported grains offset higher electricity prices.
Peru’s sol rose this week on speculation higher prices for metals, including copper, will continue to lure foreign investment into the country.
Peru’s sol posted its steepest decline in two months after the central bank stepped up dollar purchases to soak up supply from companies paying taxes in local currency.
Peru’s sol closed at its weakest level in three months after dollar purchases by the central bank and pension funds diminished local supply of the greenback.
"The rally could have continued, but the central bank's intervention became much stronger."
- Mario Guerrero on Apr 12, 2013