Why is the dollar falling in Peru? The keys to understanding his fall

The price of the dollar continues its downward trend and, although for a few days it seemed to have a few small increases in its value, this Thursday, July 13, the exchange rate closed at S/3.5740, the lowest in almost three years, according to the Central Reserve Bank of Peru (BCR). Although it may seem like a very complex issue, the factors driving this trend can be easily explained. Here we tell you the details of a specialist on the subject.

Why is the dollar falling in Peru?

To know and understand the keys of the dollar crash In Peru, we spoke with Jorge Carillo Acosta, a professor at the Pacífico Business School. First, you have to understand that “when there are a lot of people who want to buy the dollar, the price goes up”. “On the contrary, when there is a lot of supply, a lot of people who want to sell, the price goes down“, comments the specialist by way of introduction. This is something that is always true, but there are two situations that contribute to this drop.

Carrillo Acosta indicates that the delivery of gratuitieswhose maximum term to be deposited is this July 15, would have to do with this very low value of the currency of USA. “Many export companies, mining, agro-industrial, for example, receive dollars. They have to pay bonuses, which are due soon, to their employees, and they have to pay them mostly in soles. So, they go out and sell dollars to be able to pay for the free ones in soles, as well as fortnightly salaries.“, explains the finance expert.

This leads to exchange rate down, since it is an oversupply of dollars. And, added to this, inflation in USA also contributes to this situation.

What happens in the United States that explains the fall in the exchange rate?

“The other issue is the news about inflation in USA. (The figures) have been lower than expected”, highlights Jorge Carrillo. In fact, the fact is that Inflation in the North American country has fallen compared to last year, reaching 3% in June 2023, compared to 9.1% a year ago. How does this contribute to the fall of the dollar?

“This means that the probability that there will be a significant increase in the interest rate of the United States Federal Reserve is less and less. Thus, since there is less probability that the reference rate will rise, the new Sun of the Peru it becomes strengthened. Since investors are not going to want to migrate to the North American country, they are going to prefer to stay in Peru, because the interest rate is not as attractive as it would seem if it were to rise in the US.”concludes the financial expert.