Peru Sol climbs most in seven weeks on bets Fed stimulus to boost inflows

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By John Quigley
Bloomberg

peru

Peru’s sol climbed the most in seven weeks on speculation that measures to bolster the U.S. economy will spur demand for higher-yielding assets in emerging markets with steeper interest rates.

The sol gained 0.2 percent to 2.7943 per U.S. dollar at 4:50 p.m. New York time, from 2.7985 on Oct. 29. Peruvian markets were closed yesterday for a national holiday.

U.S. policy makers meeting today and tomorrow will probably announce a plan to purchase at least $500 billion of long-term securities, according to economists surveyed by Bloomberg News. Five interest rate increases this year in Peru, as well as the potential for higher prices for its commodity exports, make the country a magnet for investment as the U.S. boosts the money supply, said Bertrand Delgado, an economist at Roubini Global Economics LLC in New York.

“Managers want a larger part of their portfolios invested in” fast-growing Latin American countries, Delgado said.

Gross domestic product in Peru, the world’s second-biggest copper exporter, may rise 8 percent this year, according to the central bank.

Peruvian policy makers may keep the benchmark interest rate at 3 percent for the rest of this year, Alejandro Grisanti, an analyst Barclays Plc, in an e-mailed note to clients yesterday after the national statistics agency reported the second consecutive monthly decline in consumer prices because of cheaper food.

The central bank’s reference rate may rise to 4 percent by the end of next year, Grisanti said.

Lower costs for chicken and vegetables led consumer prices to fall 0.14 percent last month from September and caused the annual inflation rate to slow to 2.1 percent from 2.37 percent, the national statistics office said yesterday.

The yield on Peru’s benchmark 8.6 percent sol-denominated bond due August 2017 declined two basis points, or 0.02 percentage point, to 4.81 percent, according to Deutsche Bank AG’s local unit.

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