Dollar in Colombia: Its behavior will be like this in the third week of January

Reference photo. / Bloomberg Agency

Photo: Bloomberg Agency

The dollar remained in the $4,000 range during the second week of the year. Expectations for the currency’s behavior last week were driven by the publication of inflation data in the United States, which showed the consumer price index was not falling at the expected pace.

dollar closed at its price $3,893 this Friday, January 12, which represents a $34 decrease compared to last Thursday, January 11 ($3,927) closing.

“The dollar has been quite volatile in the first half of January, but the trend has been more to appreciate than depreciate; That is to say, the peso has strengthened to such an extent that investors and those who deal with the dollar pay great attention to when the Central Bank of the United States lowers interest rates in that country. This has increased the risk appetite for emerging countries. The market is a little high,” said Sergio Olarte, chief economist at Scotiabank Colpatria.

💵 What affects the value of the dollar?

It is noteworthy that the behavior of the dollar depends on external and internal factors, such as economic policy decisions made in the United States, employment figures, and the economic and political situation of the country.

The value of a currency shows high dependence on decisions taken by the United States Federal Reserve (Fed) regarding interest rates. In the final months of 2023, the Fed Board has voted to keep rates unchanged, and they are expected to begin falling as inflation declines.

As experts point out, lower rates translate into a more favorable exchange rate for Colombians.

🌎 Economy of the United States

The United States economy is the variable that weighs the most on the dollar’s fluctuations. On Thursday, it was revealed that inflation in that country accelerated through the end of 2023, challenging market expectations that the Federal Reserve would soon start lowering interest rates.

The consumer price index closed 2023 at 3.4%, after the biggest rise in three months, according to government data. Monthly variation was also greater than expected.

Core inflation (which excludes food and energy prices) rose 0.3% in December from the previous month. In annual terms, the so-called underlying index rose 3.9%. Economists prefer the underlying indicator because they consider it a better measure of the inflation trend than the headline CPI.

“Inflation in the United States is stabilizing around 3%, above the Fed’s 2% target, which will lead the unit to keep rates on hold longer than expected and postpone the cut until the second half of the year. “Thus, the dollar will remain strong during the first half of the year and weak in the second half,” said analyst David Ballen.

The premise with respect to the price of the dollar is that the more greenbacks circulating in the country, the lower their price, hence, what happens to the dollar fed Will be decisive.

Much of the dollar’s performance is tied to the behavior of the economy that produces them, i.e. the United States.

Investors – again, the ones who bring the dollars – always keep an eye on politics, to know what the Colombian economy looks like and whether it is appropriate to “jump into the water” with new productive projects. Therefore, regardless of ideology or political side, whatever is happening in the country has an impact on the value of the dollar as it can increase or decrease the inflow of currency.

💰Dollar price prediction

This year, the dollar is expected to remain relatively low, below the $4,000 barrier. It is likely, as experts have said, that the $3,800 threshold will be reached again. However, all of these forecasts are subject to change to the extent that changes are recorded in the world that could affect the reduction, such as the escalation of the conflict on the Ukraine and Gaza border in addition to other geopolitical tensions. And commercial.

For this coming week, experts have predicted a currency that could range between $3,900 and $4,000.

According to Olarte, people who think about investing in dollars need to analyze what they are going to invest in. First, “they have to make sure they are formal investments; Second, keep in mind that the returns offered by investing in dollars must compensate for the risk and uncertainty caused by the exchange rate or they may have in their mind that this is money that is going to stay out, i.e. Always think in dollars, not how much they cost when brought in.”

Have you already heard the latest news? Economic, We invite you to see them in El Espectador.