By John Quigley
Peru’s sol was unchanged at a 23- month high after increased overseas demand for the currency offset a decline in copper, the nation’s top export.
The sol traded at 2.8235 per U.S. dollar at 3:53 p.m. New York time.
Demand for the local currency is rising as foreign investors buy sol-denominated bonds amid a faster-than-expected rebound in the Peruvian economy. The yield on Peru’s benchmark 8.6 percent August 2017 bond last week fell the most in a year, as foreign investors bet the sol won’t weaken and interest rates won’t rise as quickly as local investors expect since inflation remains under control.
“There’s a big appetite for soles right now because of interest in local assets,” said Gonzalo Navarro, head trader at Banco Santander in Lima. “The sol is divorced from the other markets.”
Peru’s economy may expand 6 percent this year, and gross domestic product may have risen at a “double-digit” rate in the second quarter, Finance Minister Mercedes Araoz told reporters today in Lima.
The central bank didn’t intervene in the foreign exchange market today, it said on its website. The bank has bought dollars in 13 of the last 15 trading sessions to ease gains in the sol.
The yield on the benchmark bond fell two basis points, or 0.02 percentage point, today to 5.54 percent, after dropping 24 basis points last week.