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Price of the dollar: why and since when did the exchange rate pass the barrier of S/ 3.90?

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The price of the dollar in Peru continues to rise and closed this monday september 26 at S/ 3,941. The exchange rate passed the S/ 3.90 barrier six days ago and has remained in that range ever since. Despite the rise, the value of the dollar still registers a variation of -1.25% compared to the end of 2021, when it was quoted at S / 3,991.

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One of the main factors that explains the increase in the exchange rate is the increase of 0.75% that the Federal Reserve of the United States (Fed) made to its interest rate. “With the expectation of the rate rise, the strengthening of the dollar at a global level is much greater than it was until a few days ago,” Juan Carlos Odar, director of Phase Consultores, explained to La República.

Hugo Perea, chief economist for Peru at BBVA Research, also consulted by this means, agrees with him. “This perception that dollar interest rates are going to be higher is generating a rearrangement of investors’ portfolios and is also generating some concern that the world economy will slow down more intensely”, said the expert.

factor of uncertainty plays an important role in raising exchange ratessaid Perea. He also highlighted the role of Central Reserve Bank of Peru (BCRP) to “de-dollarize” the national economy. “It has been a great job of BCRPwhich since 2014 has been preparing the Peruvian economy for events of this type”, he analyzed.

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Follow what the price of the dollar is today in Peru, Monday, September 26, 2022. Photo: John Reyes/La República

For Juan Carlos Odar, the fear of recession in europe it also explains why the dollar is gaining ground against local currencies. “The combination of all that is what is leading to the dollar be pressured upwards”, argued the economist, who generalized that this upward trend is present in Latin America.

Currently, the euro is trading below the dollar. In this way, at the local level, on Monday, September 26, the European currency was valued at S/ 3,785, while the US currency at S/ 3,941, according to information from the BCRP.

How likely is it that the exchange rate exceeds S / 4?

In October 2021, the price of the dollar reached the record price of S/ 4.1380 in the context of an adverse political scenario for the economy due to disputes between the Executive and Legislative branches, in addition to the fact that the ratification of Julio Velarde at the head of the BCRP.

Eight months passed before the exchange rate touch the S / 4 again, when it closed the day of July 12, 2022 at S / 3.9680.

According to Juan Carlos Odar, the BCRP will play a key role so that the local currency can be strengthened against the dollar. A direct intervention of the institution and its possible increase in the reference rates could help moderate the pressure on the escalation of the US currency. “In the comparison it has been seen how this year the sol is one of the few currencies in the world that has appreciated against the dollar,” he remarked.

The volatility among economic actors —investors, companies, families, the State, etc.— makes it difficult to predict the trend of the dollarsays Perea. “Today it is very difficult to have any idea of ​​where the exchange rate. I would not rule out that it could go above S/ 4, but I do not think that will happen in the short term”, said the BBVA Research executive.

How does the rise in the dollar affect the economy of Peruvians?

According to Odar, this US currency rise again close to S/ 4 affects people with income in soles and debts in dollars. Similarly, it affects entrepreneurs engaged in foreign trade. “As the exchange rate rises, prices become more expensive. imported goods. Directly, let’s think of a product in dollars that also has high inflation. That makes the cost of products coming from the United States much higher,” he warned.

In this analysis, Perea once again agreed: “If there is someone who wants to import products from abroad, buy some good that is listed on the Dollars, but he wins in soles, it will cost him more effort”. If a person took credit in dollars to import or export it will be more expensive, affecting him.

Source: Larepublica

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