The dollar fell by 7.17% so far this year, with 15 sharp falls

In almost two and a half months, the dollar moved away from S / 4.00 and has lost -7.17% against the Peruvian sol after a 2021 marked by the pandemic, inflation and political uncertainty that reigned during and after the process. electoral. The greenback closed last week at S/ 3.70, a level not seen since March 2021.

The presented downward trend is supported by strong decline peaks. To date, 15 minimum prices have already been registered, after closing 2021 at S/ 3,991. Of the total records, nine correspond to January, three to February and three to March.

Monetary policy, macroeconomic fundamentals and the current war (in the short term), highlighted Omar Azañedo, CEO of Noncash.

This is how the dollar falls

In detail, on the first day of 2022 (January 3), the refuge currency succumbed -0.78% to settle at S / 3,960; on Friday, January 7, it was quoted at S/ 3,931. However, the week in which the US currency showed the most fluctuations was between January 11 and 17, when it fell for five continuous days (see chart) and entered fully at S/ 3.80. On January 20 and 21, the dollar would set records again, trading at S/ 3,837 and S/ 3,835.

One of the events that marked the trajectory of the currency was the rise in the reference rate to 3% by the Central Reserve Bank of Peru (BCRP).

“These rate hikes have been timely and on the right scale unlike what is feared to happen in USA and in Europe. A high rate makes the Peruvian market more attractive for capital seeking better returns, which translates into a greater arrival or income of dollars”, Azañedo highlighted to La República.

At the beginning of February, a new political crisis would arise with the swearing-in of two ministerial cabinets, but as can be seen in the infographic, as the exchange rate passed, it was heading towards the threshold of S/ 3.70.

Indeed, on February 9, the currency fell for the tenth time and stood at S/ 3,805 after Hannibal Torres sworn in as prime minister and endorsed a social market economy. A day later, the US bill hit a new low and reached S/ 3,740, a depreciation of -1.71%. Seven days later it deepened its fall and stood at S / 3,727.

At the end of February, the war broke out in Ukraine and we saw the dollar return to the range of S/ 3.80, at least for one day.

So far in March, the refuge currency already has three records. On Monday 7, it was quoted at S/ 3,725, before a new maximum in the price of copper (US$ 10,845); three days later it fell to S/ 3,713 and last Friday the 11th it fell back to S/ 3,705, after the announcement of an increase in the rate to 4%.

Adrián Armas, central manager of Economic Studies of the BCRPpointed out last Friday at a press conference that the Peruvian sol is strengthened by the strong collection of income tax from the mining sector, especially copper, and the low demand for greenbacks from companies in a “stability” scenario.

Emerging bonds could take off thanks to the Fed

According to Bloomberg, the additional yield offered by sovereign debt of developing countries over US Treasuries has risen above 500 basis points.

“The rise in rates makes the Peruvian market more attractive.”

Latin currencies on the rise and the hegemonic dollar

The survey of macroeconomic expectations carried out in February by the Central Reserve Bank of Peru (BCRP) to economic agents already places the exchange rate at S/ 3.90 by the end of the year.

Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. expect more gains from Latin currencies as correlations with high commodity prices from the war in Ukraine tighten.

Treasury Secretary Janet Yellen said the dollar is in no danger of losing its status as the world’s dominant reserve currency as a result of sanctions imposed against Russia.