Of the 695 pesos that have risen dollar in March for new coronavirus pandemic and given the fall in oil prices, until the historic ceiling of 4,153.91 pesos was reached on March 20, the currency price has already returned 686 pesos, with the peculiarity that half of this decline occurred in the last month (355 pesos) and in the last week pesos to settle at 3,467 pesos on Friday.
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There are three main factors behind the reduction in the exchange rate that comes as gloves for those who buy Christmas shopping abroad with a card, for those who buy tickets for a trip abroad, and for importers; two of them international and one concerns Colombia.
According to financial analysts consulted by EL TIEMPO, good news on the effectiveness of covid-19, which have increased market optimism and the necessary liquidity that central banks irrigate the world to support reactivation are the external and main factors that led to the bending dollar.
Even according to Felipe Campos, director of research at Alliance Valores y Fiduciaria, the Colombian peso has been the most valuable currency in developing countries since the vaccine was announced, and was previously one of the five most undervalued.
For Juan Pablo Espinosa, Director of Economic, Sectoral and Market Research at Bancolombia, the efficiency percentage announcement was vaccine, reinforced by the United Kingdom’s decision to start approving the same vaccine, meant a very important change in the trend in international financial markets, which, given the expectation that there would be a faster recovery for this reason, increased their willingness to take risks, which was reflected in a very high cash flow recovery. investment in developing countries, including Latin America and Colombia, which have significantly supported the peso.
In other words, international investors, who believe that the situation is improving, decide to shift their resources to invest in assets that, although they carry more risk, can generate higher returns.
Another key factor, according to Alejandro Reyes, chief economist at BBVA Research, is that given the scale of the global crisis, central banks need to increase the liquidity of economies in order to ensure recovery and market stability, which also affects the increase in available dollar resources all countries, which leads not only to a reduction in currency, but also to the opening of appetite to buy shares.
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In fact, according to Colombian Stock Exchange, From October 5 to Friday, the Colcap Index rose 14.8 percent, reflecting stock appreciation.
“The liquidity provided by the world’s major central banks is unprecedented.” This is ultimately reflected in the flow of resources, which seek valuable opportunities that will certainly not be in low-interest economies, or that the expected tax cuts or favorable conditions for production are not on the fringe, as has happened in the past. recent years in the United States, “he assures.
The third relevant factor for the decline dollar, especially in recent weeks, in recent days when it has become apparent that the government is taking steps to pay the funds requested from International Monetary Fund (IMF), through the entity’s flexible credit line with more than $ 5,000 million, which should be completed by the end of the year.
In this regard, Juan Pablo Espinosa of Bancolombia explains that this will mean a significant arrival of dollars and a considerable amount of monetization by the end of the year, which has led to greater demand for pesos and supply of dollars.
“We expect this trend to continue in the short term, perhaps not at the rate that has occurred in recent days, but the revaluation trend may continue for the rest of 2020,” he said.
But there are forces that push on dollar down Are they sufficient to achieve a larger decline, even to reach the level of 3,282 pesos, which was the average for 2019?
According to Alejandro Reyes of BBVA Research, although it is a possibility, it is difficult to see it for the rest of the year because there is uncertainty as to when the vaccines will arrive or whether there is a second wave that generates saturation in the health system.
And while the forecast for the currency to close is difficult, it is likely to be below 3,600 pesos, much less than analysts had expected a few weeks ago.
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Reyes adds that the factor in the growth of the dollar is that in the last week of the year the volume of trading due to the holidays decreases a lot, which means that those who really need to close operations, buy or sell have the opportunity to move a lot in the market.
“The global trend, unless nothing extraordinary happens, is moving towards a cycle of appreciation of the peso due to the abundant global liquidity and the relatively good return offered by local assets,” he said.
In 2021, the movement will be flatter
For analysts, the exchange rate in 2021 will certainly be flatter than originally expected, as what has been observed in recent weeks is the expectation of a good part of the movement expected in 2021, when news of vaccines and improvements in oil prices, including end of 2020.
“I think the most important thing for the time being is to take into account that much of the stress observed in the currency has disappeared as a result of the pandemic. This reduces inflationary and cost pressures on public and private debt, ”said Alejandro Reyes, chief economist at BBVA Research.
He adds that if the economy positively avoids covid (infections and vaccines) in 2021 and economic activity recovers as expected or better, there may be room for the dollar to fall to 3,282 pesos in 2022.
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Omar G. Ahumada Rojas – Deputy Editor for Economics and Business
A Twitter: @omarahu