BCRP: dollar would be between S/3.70 and S/3.85 until 2025

The dollar has been showing a downward trend in recent months, reaching S/3.6470 yesterday, its lowest level since April 4 of last year. This taking into account that during the third quarter of 2022 the US currency reached peaks of up to S/4.00.

However, given the fall of the dollar, economic agents expect that at the end of this year it will be between S/3.70 and S/3.80, according to the latest Survey of Macroeconomic Expectations of the Central Reserve Bank of Peru ( BCRP).

They even project that the exchange rate would remain below S/3.90 in the next two years. For 2024 the perspective goes from S/3.75 to S/3.80while for 2025 the look is from S/3.70 to S/3.85.

Circumstances

The current depreciation of the US currency is due to various factors, including the consecutive drop in inflation in the United States, which in May stood at 4.0%. This, in turn, encouraged the Federal Reserve (Fed) to lower its interest rate hikes for the first time in 10 months.

“This is the first month in which the rise in rates has been paralyzed, which will generate the expectation that the dollar will fall,” says César Romero, Head of Research at Renta4 SAB.

For his part, Javier Pinedageneral manager of Billex, indicates that if this inclination in the United States rates continues and if the Central Reserve Bank of Peru continues to maintain its interest rates —which for the fifth consecutive month are located at 7.75%— and implements policies optimal monetary conditions that contribute to a better economic situation in 2024 and 2025, “we could talk about a sun that is getting stronger, which generates greater incentives for the exchange rate to follow a downward trend”.

KEYS

The sol has positioned itself as the strongest and most stable currency in Latin America.

After stopping the restrictive policies of Covid-19, the GDP of China would grow at 5%, which would increase demand.