The price of the dollar in Peru: why did the exchange rate rise and what awaits Latin American currencies? , BCRP | MEF | Scotiabank BBVA | economy

A recent report by Credicorp Capital said that the direction of the dollar in the coming months will respond more to external factors than domestic, for which the monetary policy stance of the United States Federal Reserve (Fed) will be important. At the beginning of the year, the currency has shown a trend towards appreciation which is expressed in the increase in the exchange rate in Peru.

In the final official closing of exchange rateThis Friday, February 2, the currency was at S/3.8320, indicating an increase of 0.52% compared to the first day of February, which was not recorded since October last year. To understand the reasons for this rise in the dollar in recent weeks and its impact on the main Latin American currencies, Republic Talked to experts in the field.

Dollar in Peru: why is the exchange rate rising?

According to javier pinedaOmar Azanedo, CEO and economist of digital exchange house Billex, says there are internal and external factors to explain the 3.37% increase that the dollar has received in our country compared to the last price in 2023, when it closed at S/3,707. ,

,The dollar is intrinsically rising or will rise in the next months in line with the monetary policy of the Central Reserve Bank and that implies a sustained reduction in interest rates in soles to reactivate the economy. That is to say, loans are going to be cheaper across the board, there is a tendency for more consumption and there is a tendency for companies to increase their borrowing. Loan in soles to finance their activities,” Pineda explains.

for its part, Omar Azanedo This shows that we are in a scenario of low economic growth globally, regionally and within the country. However, he says the US market remains one of the most attractive markets for savings and investment vehicles. Evidence of this is that, according to the United States Department of Labor, employers created many more jobs in January, a trend that makes the Federal Reserve less likely to cut interest rates.

“While there are expectations that inflation will no longer be high, there are no expectations that prices will return to their pre-crisis levels. the same thing that happens with Rate of interest, There is a scenario in which they will no longer grow, but it cannot be guaranteed that they will return to their previous level. The dollar remains a store of value and people find the US market the most attractive investment vehicle.“, indicates Azanedo.

What is the forecast dollar exchange rate this year?

The value of the dollar in Peru rose in line with the performance of the US currency and a decline in the international copper price. However reports Credicorp Capital A range between S/3.70 and S/3.80 is forecast at the end of 2024, warning of the need to monitor the economic impacts of the El Niño phenomenon and discussing new withdrawals from pension fund administrators. For its part, BBVA Research estimates that the exchange rate will close this year between S/3.85 and S/3.95, while Scotiabank indicates that it will be at S/3.75.

“At least, during this first half of the year, there will be a tendency for the dollar to strengthen. That is exchange rate There will be growth in our country, this is because the Central Reserve Bank will continue to lower its interest rates in soles. What may happen in the second half is that volatility may persist and there will be no further upside. In that sense, the exchange rate may remain at S/3.85. We do not believe it will reach S/3.90. However, this is difficult to estimate with dollars.“, said Billex’s Javier Pineda.

Dollar Price: What awaits Latin American currencies in 2024?

“It is expected that, with the cycle of policy rate cuts around the world, debt placements will become active again, leading to increased demand for the dollar,” according to the Credicorp Capital report. in the matter of The exchange rate in Chile is estimated at 950-975 pesos. For the middle of this year. However, towards the end of 2024 and to the extent the Fed eases monetary conditions, the dollar could weaken to the 870 level.

Although, during 2023, the Colombian peso was ranked as the most appreciated currency in the emerging world, temporary episodes of appreciation in the short term are not ruled out. In that sense, Credicorp The exchange rate for the end of the year is estimated to be around 4,150-4,200 pesos And they are conservative in the face of economic challenges and political uncertainty in that country.

For its part, in Brazil forecasts exchange rate of 5.05 reais for year-end And they predict a pessimistic scenario that includes additional fiscal stress or impacts due to the El Nino phenomenon, although they do not rule out a drop in the rate to maintain the level of 4.75 reais.

Finally, although a gradual depreciation of the Mexican peso is anticipated due to Central Bank of Mexico policy changes, electoral uncertainty and a slowdown in currency flows offset this. Estimate of 18.1 pesos for the end of 2024.