Colombia: Colombian peso rallies ahead of OPEC meeting, stable after meeting yields no deal
April 18, 2016
The Colombian peso (COP) had been appreciating steadily since February as it followed a rally in oil prices ahead of a 17 April meeting of OPEC and non-OPEC countries in Doha. The meeting had upheld the prospect of a deal among oil-producing countries that would freeze oil production with the intention of reviving energy prices down the line. The peso reached 2,997 COP per USD on 15 April—the last day of trading before the OPEC meeting—which represented a 5.3% appreciation over the value tallied on the same day of the previous month and was 19.6% weaker compared to the same day of last year. The currency strengthened 5.6% from the beginning of the year.
However, the Doha meeting failed to yield an agreement between oil producing countries, which sent ripples through several of the world’s currencies that are strongly linked to energy prices. The peso managed to stave off any large losses the day after the meeting and closed 18 April at 2,970 COP per USD.
The Colombian Central Bank has adopted a tightening stance in an attempt anchor inflation expectations and bring inflation back within its target range. Part of their strategy involves strengthening the COP, which would reduce the prices of imported goods and services. The rally in the COP will come as good news to the Central Bank, although the disagreement at the Doha meeting does not bode well for currencies strongly linked to energy prices, including the COP.
Author: Robert Hill, Economist