The dollar remains highly dependent on decisions taken by the Board of Directors of the Federal Reserve (Fed).
He Dollar On Monday its price fell to $3,904.50. This represents a decrease of $7.5 compared to Friday’s close, thus registering a variation of -0.19%.
Representative Market Rate (trm) remains at $3,916.39.
The dollar remains strongly dependent on what decisions the Board of Directors of the Federal Reserve (Fed) may make regarding interest rates.
The above is explained because to the extent that rates are low, there will be more investment opportunities, meaning more dollars will be in circulation in countries like Colombia. Such a scenario would indicate a cheaper currency.
At its most recent meeting, the Fed voted to keep rates steady, and is expected to prepare its first cut in line with the decline in inflation in the United States, which, it must be remembered, will make credit more expensive. Making has been the main strategy to deal with the increase in shortage.
“Although from start to finish, the exchange rate has not changed that much, volatility has been higher,” comments Jacqueline Pirajan, economist at Scotiabank Colpatria. In his opinion, this instability can primarily be attributed to international causes.
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Last week, these factors included the World Economic Forum meeting in Davos, where “statements were heard from central bankers who tried to reduce expectations about quick cuts in interest rates in the United States and Europe and other developed countries. Were.” Pirajan argues.
And they concluded that “The S&P announcement produced a modest and short-term impact on the exchange rate, which is why we confirm the view that what matters most for the exchange rate at this time remains the international component. ” Pirajan is referring here to Colombia’s credit rating that Standard & Poor’s published this week, a decision in which it maintained the grade (BB+), but lowered the future outlook from stable to negative.
What will be the factors that will influence the dollar this week?
On the international component side, Diego Franco, head of investments at Franco Capital Asset Management, also sees the market adjusting to the Federal Reserve’s (Fed) lower than expected interest rates, an issue that is easing.
It is important to clarify here that the next meeting of the Fed to decide on interest rates will be held between January 30 and 31, then it is not expected that there will be a cut in interest rates, because although inflation is coming down. There is still strength in the labor market, which could indicate that the Fed estimates there is still room to keep the brakes on rates.
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Among international factors, Juan David Bullen R., director of analysis and strategy at Casa de Bolsa SCB, also sees inflationary effects that “will generate an increase in sea freight prices as a result of the disruption in the Suez Canal” such as the drought in the Panama Canal. .
These are two main pressures on global trade, which could push up the price of all types of goods, giving oxygen to inflation and thus preventing a possible rate cut from the Fed.
Specifically for the week, among the data the analysts consulted, the biggest impact on the dollar in Colombia will be seen by the release of fourth quarter GDP data from the United States.
Similarly, in the international arena also, first decisions have been taken by central banks on their interest rates (for example in Japan and Europe). These determinations, added to US GDP data, “are very important because they will confirm, or rule out, the possibility of a sharp cut in interest rates. For this reason, the second week we must pay a lot of attention to what is happening outside, to know what is happening with the exchange rate in Colombia.
For Franco, it is possible that, in this scenario, the dollar will touch $4,000 by the end of the week.
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