The direction of the dollar will respond in the coming months to external factors more than domestic ones, for which the monetary policy stance of the United States Federal Reserve (Fed) will be important, says a recent report by Credicorp Capital. At the beginning of the year, the currency has shown a tendency towards appreciation that is expressed in the rise in the exchange rate in Peru.
In the last official closing of the exchange rate, which was this Friday, February 2, the currency stood at S/3.8320, which indicated a growth of 0.52% compared to the first day of February, which did not It was registered since October of last year. To understand the reasons for this increase in the dollar in recent weeks and its impact on the main Latin American currencies, The Republic spoke with specialists in the field.
Dollar in Peru: why is the exchange rate rising?
According to Javier Pineda, CEO of the digital exchange house Billex, and economist Omar Azañedo, there are internal and external factors to explain the 3.37% increase that the dollar has received in our country compared to the last quote in 2023, when It closed at S/3,707.
“The dollar internally is moving or will move in the following months in accordance with the monetary policy of the Central Reserve Bank and this implies the continuous reduction of the interest rate in soles to ensure that the economy is reactivated. That is to say, credits in soles are going to become cheaper, there is a propensity for greater consumption and for companies to take out their debts in soles to finance their activities,” explains Pineda.
For his part, Omar Azañedo states that we are in a scenario of little economic growth globally, regionally and in the country. However, he points out that the American market remains one of the most attractive for savings and investment instruments. Proof of this is that, according to the United States Department of Labor, employers created many more jobs in January, a trend that reduces the chances of the Federal Reserve cutting interest rates.
“While there is an expectation that inflation will no longer be high, there is no expectation that prices will return to their pre-crisis levels. The same thing happens with interest rates. There is a scenario in which they will no longer rise, but it cannot be guaranteed that they will return to their previous levels. The dollar continues to be a reserve of value and people find the most attractive investment instruments in the American market.“, indicates Azañedo.
What is the projection of the dollar exchange rate for this year?
The price of the dollar in Peru increased in line with the performance of the US currency and in the face of a fall in the price of copper internationally. Although the Credicorp Capital report warns of the need to monitor the economic impacts of the El Niño phenomenon and the discussion of new withdrawals from the Pension Fund Administrators, a range between S/3.70 and S/3 is estimated. 80 at the end of 2024. For its part, BBVA Research projects 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 to strengthen the dollar. That is, the exchange rate will rise in our country, this is because the Central Reserve Bank is going to continue lowering its interest rates in soles. What could happen in the second half is that volatility could be maintained and there would be no further increases. In that sense, the exchange rate could remain at S/3.85. We do not believe it will reach S/3.90. However, with the dollar it is difficult to predict“, said Javier Pineda from Billex.
Price of the dollar: what awaits Latin American currencies in 2024?
According to the Credicorp Capital report, “it is expected that, with a cycle of cuts in policy rates around the world, debt placements will be reactivated, increasing the demand for dollars.” In the case of Chile, an exchange rate is projected at 950-975 pesos for the middle of this year. However, towards the end of 2024 and to the extent that the Fed relaxes monetary conditions, there could be a weakening of the dollar to levels that would reach 870.
Although, during 2023, the Colombian peso was positioned 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 estimates an exchange rate close to 4,150-4,200 pesos for the end of the year and they are conservative in the face of economic challenges and political uncertainty in that nation.
For its part, in Brazil projects an exchange rate of 5.05 reais for the end of the year and they predict a pessimistic scenario that involves additional fiscal tensions or effects due to the El Niño phenomenon, although they do not rule out the decline of the rate to maintain a level of 4.75 reais.
Finally, although a gradual depreciation of the Mexican peso is anticipated due to the change in the policy of the Central Bank of Mexico, electoral uncertainty and the slowdown in currency flows adjust the projection for the end of 2024 at 18.1 pesos.
Source: Larepublica
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