Of the 695 pesos that rose dollar in March for a coronavirus pandemic and due to the fall in oil prices, until the historic ceiling of 4,153.91 pesos was reached on March 20, the exchange rate has already returned 686 pesos, with the features that half of that decrease occurred in the last month (355 pesos) and the last week the decrease was 143 pesos, to settle at levels of 3,467 pesos on Friday.
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Behind the reduction in the exchange rate, which emerges as a glove for those who make their Christmas purchases abroad with a card, those who buy airline tickets to travel outside the country and for importers, there are three main factors; two of them international and one dealing with Colombia.
According to financial analysts consulted by EL TIEMPO, the good news about the effectiveness of the covid-19 vaccine, which has increased market optimism and the necessary liquidity that central banks are watering in the world to increase reactivations are the external and main factors that have led to dollar.
Even according to Felipe Campos, research director at Alianza Valores y Fiduciaria, the Colombian peso has been the most valued currency in emerging markets since its announcement and was previously one of the five most undervalued.
For Juan Pablo Espinosa, Head of Economic, Sectoral and Market Research at Bancolombia, the Communication on the efficiency percentage for vaccine, reinforced by the UK’s decision to initiate its authorization, has led to a very important change in the trend in the international financial markets, which, given the expectation that there will be a faster recovery due to this reason, has increased their risk appetite, leading to a very large recovery in cash flows. investments vis-à-vis emerging markets, including Latin America and Colombia, which have given the peso a significant boost.
In other words, international investors, who see that the situation is improving, decide to move their resources to invest in assets that, even if they involve greater risk, can generate greater returns.
Another important factor, according to Alejandro Reyes, chief economist at BBVA Research, is that given the scale of the global crisis that erupted, in order to guarantee recovery and ensure market stability, central banks increased the liquidity of the economy, which also affects an increase in available resources. in dollars that reach all countries, not only generates a depreciation of the currency but also opens the appetite to buy shares.
(For: “November inflation was -0.15 percent”).
In fact, according to Colombian Stock Exchange, From October 5 to Friday, the Colcap index had risen by 14.8 percent, which reflects the share estimate.
“The liquidity granted by the most important central banks in the world is unparalleled. This is ultimately due to translating into a flow of resources looking for value opportunities that will certainly not exist in low-interest-rate economies, or that in the margins are not expected tax cuts or favorable production conditions, as was the case in the past. recent years in the United States, he says.
The IMF effect
The third relevant factor for the decline dollar, especially in recent weeks, it occurred in recent days, when it became known that the government had taken steps to disburse the resources International Monetary Fund (IMF), through the unit’s flexible credit limit, with more than $ 5,000 million, which is expected to close for the rest of the year.
In this regard, Juan Pablo Espinosa, from Bancolombia, explains that this will mean a significant arrival of dollars and a significant amount of revenue generation at the end of the year, which has led to a greater demand for pesos and the supply of dollars.
“We expect the trend to continue in the short term, perhaps not at the rate that has been in recent days, but the revaluation trend may remain for the rest of 2020,” he said.
But are the forces that are pushing dollars down Are they enough to achieve a larger decline and even reach levels of 3282 pesos, which was the average for 2019?
According to Alejandro Reyes from BBVA Research, although this is a possibility, it is complicated to see during the rest of the year, as there is uncertainty about when the vaccines will arrive or if there is a second wave that generates saturation in the health system.
And although the forecast for the closing of the currency is complex, it may be below 3600 pesos, which is much less than analysts expected a few weeks ago.
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Reyes adds that one factor in the rise in the dollar is that the volume of trade is falling sharply due to the holidays and this means that those who really need to close a business, buy or sell, have the opportunity to move the market a lot.
“The global trend, if nothing extra happens, is towards a cycle of peso appreciation due to the abundant global liquidity and the relatively good returns that local assets offer,” he said.
In 2021, the movement would be flatter
For analysts, the exchange rate profile in 2021 will certainly be flatter than originally forecast, as what has been observed in recent weeks is an expectation of a good part of the movement expected in 2021, when news of vaccines and improvements in oil prices, including what was expected at the end of 2020.
“I think the most relevant thing at the moment is to keep in mind that much of the stress observed in the currency due to the pandemic has disappeared. This reduces the inflationary pressure and the cost pressure on public and private indebtedness,” said Alejandro Reyes, chief economist at BBVA Research.
And he adds that if the economy avoids covid (infections and vaccines) in a positive way in 2021 and a recovery in economic activity is observed in line with expectations or better, there may be room for the dollar to fall to levels of 3,282 pesos by 2022.
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Omar G. Ahumada Rojas – Assistant Editor in Economics and Business
And Twitter: @omarahu