Colombian Peso Begins to Drop After Months of High Flight

The Colombian peso, which saw a robust 15% appreciation against the US dollar over the past year, braces for a potential downturn in the coming months.

The value of the Colombian peso has been sliding consistently over the past ten trading sessions. Analysts warn that this downward trajectory may accelerate in the near future, particularly as Colombia’s central bank prepares to cut interest rates.

In the last ten sessions alone, the Colombian peso experienced a depreciation of over 5% against the US dollar, falling from a peak it had reached on April 8th.

Bloomberg reports that the impact of impending rate cuts is already starting to weigh on the currency, compounded by local uncertainties over economic reforms.

Colombia’s economy, heavily reliant on oil exports, has historically benefited from oil price rallies and higher borrowing rates. Global oil prices have been on the decline, however, presenting a challenging landscape for the country.

Furthermore, Colombia’s fiscal deficit is forecasted to widen, reaching 5.3% of its GDP, compared to 4.3% in 2023. This fiscal strain adds further pressure on the Colombian peso, as concerns about the country’s economic stability grow.

Economists cited by Bloomberg highlight another potential threat to the peso’s stability: the ongoing discussions surrounding an overhaul of Colombia’s pension system.