The Colombian peso fell to an all-time low against the dollar, and the Mexican peso advanced to its best level since June

(CNN Spanish) — The Colombian peso hit an all-time low against the dollar on Tuesday, crossing the 5,000-peso mark for the first time in its history. While the Mexican peso hit its best level against the US currency since June this year, amid a mixed close for Latin American currencies at the end of the first day of November.

This Wednesday, the dollar closed at an average of 5,016.07 pesos, after an increase of 40.49 pesos compared to the representative market rate.

This is how the main Latin American currencies moved at the beginning of November.

Dollar vs. Colombian peso

The Colombian peso hit a new low at the close on November 1, hitting an all-time high of 5,014 pesos to the dollar, down 1.54%, marked by international caution ahead of the United States Federal Reserve’s decisions. and local uncertainties stemming from the economic policy of the government of President Gustav Petar, according to Reuters.

“A sharp increase in interest rates by the Fed, the risk of a looming recession and a loss of confidence due to political uncertainty have resulted in currency depreciation,” In On said in a note. Capital.

The Colombian peso has weakened 17% in 2022 under pressure from political uncertainty.

Colombia’s finance minister, José Antonio Ocampo, cited a possible interest rate hike by the U.S. central bank on Tuesday as one of the reasons why the Colombian peso continues to depreciate against the dollar and assured that if interest rates rise, there could be another price hike. dollars against the Colombian peso before normalization.

“There is global pressure on currencies, including Latin American currencies, and this has been reflected,” Ocampo said this Tuesday about the price of the dollar. “I hope it will normalize. Obviously, the whole world is waiting for the (US) Federal Reserve’s decision on interest rates, which will surely be another increase.”

According to In On Capital, Colombia’s debt trackers show “the strong effect that the local environment has had on foreign investors, due to some announcements by some members of the Government that send mixed signals regarding the protection of investments in the country.”

Ocampo insisted that the country will have a “responsible macroeconomic policy.” In mid-October, Ocampo said the country would comply with the fiscal rule and there will be no exchange rate control in relation to the dollar, as Petro insinuated a few days ago, and it will diversify exports in the country.

The finance minister said on October 27 that the slight fall in the price of the dollar last week was “a clear sign that the markets believe in the country”. “I think the markets rather erred by speculating against Colombia. Now they believe in Colombia, which is what they should do,” assured Ocampo before the day on Tuesday when the dollar broke through the 5,000 peso mark.

Colombian peso dollar

Colombia, like other countries in the world, suffers from high inflation, as well as the historic devaluation of the peso against the dollar. This is due to international and local factors, according to experts. (Credit: DANIEL MUÑOZ/AFP via Getty Images)

The decline in the price of the peso against the dollar is also affected by the future tax reform, which would impose additional tariffs of up to 10% on coal and up to 15% on crude oil when average prices exceed a certain level. The reform will be voted on this week.

The Colombian currency was also weighed down by uncertainty over whether Petro, who was elected on a promise to divest from hydrocarbons, would overturn a ban on new oil contracts.

The Mexican peso is rising and the dollar is falling

This Tuesday, the Mexican peso closed at 19.7229 per dollar, up 0.36% from Monday’s Reuters reference price. Earlier this Tuesday, the US dollar was trading at 19.6840, its best level since June 10, 2022.

The Mexican currency was helped by a better global environment for risk assets amid reports that the Chinese government plans to lift strict Covid-19 restrictions in March that have stifled economic growth.

“Although not confirmed by the executive, there are strong rumors that China will form a reopening committee with the aim of ending all lockdown measures and mobility restrictions in the country in March,” CI Banco said in a statement. analysis note.

“This possibility has increased optimism among operators, favoring the purchase of higher-risk assets,” he added.

A stable political outlook amid uncertainty in Colombia, Brazil and Chile and an attractive financial performance are fueling a surprisingly strong Mexican peso, despite the country’s tepid economic outlook, experts say. (Credit: PEDRO PARDO/AFP via Getty Images)

Barclays analysts, cited by Reuters, have a favorable forecast for the closing price of the Mexican currency at the end of this year, predicting that it could close as low as 19 pesos to the dollar.

“Fiscal austerity, Mexico’s attraction to ‘nearshoring’ and the investment universe that has become smaller – investors can no longer invest in Russia, sell in China, Turkey is inoperative – are factors that make Mexico look like chocolate,” said Gabriel Casillas, Chief economist of Barclays for Latin America, at a press conference.

However, another Barclays analyst, Erick Martínez, noted that the Mexican peso could experience episodes of volatility if economic problems deepen in early 2023, although it would return to attractive levels as central banks relax their monetary policy.

“The dollar is overvalued precisely because the US central bank’s monetary policy is in a tightening cycle,” he said. “As he relaxes, the dollar will return to its fair value,” he added.

Barclays also projected Mexico’s economic growth for 2023 at 0.9%, below expectations of 2.5% for 2022, after a possible global economic recession during the first two quarters of next year, with no increase during the first and a return of 0.1% during the second.

What is happening in Brazil?

Meanwhile, the Brazilian real gained 0.56% on Tuesday, reaching 5.14 reais per dollar.

Brazil’s central bank said its inflation estimates remained in line with its policy strategy, although risks remained high and called for continued caution and calm, according to minutes of its latest policy meeting published on Tuesday and cited by Reuters.

After Brazil’s election day, which gave victory to leftist leader Luiz Inacio Lula Da Silva, Brazil’s real opened about 2% weaker on Monday and touched a one-month low, before reversing losses to rise 0.5%, it reported Reuters.

Traders said rising hopes for a more orderly transition after Sunday’s vote in Brazil were supporting markets. President Jair Bolsonaro announced this Tuesday after his election defeat that he will continue to respect the country’s Constitution, but did not directly award victory.

Jair Bolsonaro Brazil

Brazilian President Jair Bolsonaro speaks to reporters two days after Lula da Silva defeated him in the presidential runoff on November 1, 2022 in Brasilia, Brazil. (Photo by Andres Anholeta/Getty Images)

Shares of Brazil’s state-owned Petrobras, which fell by as much as 7%, pared losses to around 4%, while shares of state-owned lender Banco do Brasil SA sank by around 5%.

In Argentina, the peso fell 0.24% to 157.27-157.28 per dollar due to depreciation regulated by the central bank.

Chilean and Peruvian markets remained closed on Tuesday due to local holidays.

— With information from Reuters.

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