The dollar will reach S/3.80 in 2024, according to economic agents

Economic analysts and companies in the financial system expect the dollar to be at S/3.80 at the end of 2024, according to the macroeconomic expectations survey carried out by the Central Reserve Bank of Peru (BCRP).

Along these lines, specialists consulted by La República point out that although the currency has shown a fall in recent weeks – due to external factors – that could last in the first half -, it will then resume its upward trend to close at a maximum of S/3, 85.

The Fed as a key factor

In its last meeting of the year, the United States Federal Reserve (Fed) decided not to raise its reference interest rates. On the contrary, he signaled that he would begin the cuts earlier than expected, possibly in March.

For this reason, economist Ronald Casana points out that in the first and second quarters of the year the dollar could continue this downward trend and reach S/3.65; However, starting in July the escalation would begin in which the currency would be around S/3.75. This rise could be mitigated by metal exports, especially copper, since its current price is expected to rise by 15%.

“If we take good advantage of this boom in metals, specifically copper, it can cushion the exchange rate so that it does not reach S/3.80,” he said.

On the other hand, there are international conflicts such as the war between Russia and Ukraine, and the Israeli invasion of the Gaza Strip, which tend to have effects on the markets. However, specialists do not consider that this year there will be an escalation or contagion effect with other countries, but rather that it is most likely that the current situation will continue.

“The effect of the war should first hit the global economy and therefore the currencies. But we do not see that there is a very high risk of that happening,” says Javier Pineda, general manager of Billex.

Internal risks

While at the local level, a very intense El Niño could cause the State to allocate a larger budget than expected, generating a greater fiscal deficit, with a hit economy, the sun would weaken more, added to the fact that the interest rate would be lower, he says. Pineda.

Likewise, other risks must be considered, such as a new political crisis that triggers the resignation or vacancy of President Dina Boluarte, and this could strongly influence the dollar to skyrocket. Although both experts agree that there is little chance of that happening.

What does seem a more likely threat is the change of the Minister of Economy and Finance, Alex Contreras, in the first months of the year due to the evident deterioration of the Peruvian economy and the few results achieved. For Casana, if Contreras’ replacement is someone with leftist tendencies, the dollar will probably rise one point.

Will the dollar cost S/3.30 again one day?

For Casana, the possibility of the dollar returning to S/3.30 in the coming years—as before the pandemic—is zero.

“It is already ruled out that we can return to S/3.30. I think the best we can go back to is S/3.60. Since the economy in general is not in a good moment,” he noted.

In 2017, the currency closed at S/3.24, in 2018 it reached S/3.74 and in 2019 it stood at S/3.31, according to the BCRP.

For BBVA Research, the exchange rate will close 2024 between S/3.85 and S/3.95, as monetary flexibility in Peru advances faster than in the United States. However, the BCP projects that the US currency will be between S/3.75 and S/3.80.