Peru: Peruvian sol depreciates amid declining domestic outlook and mounting external factors
December 4, 2014
The Peruvian sol (PEN) continues to lose value against the dollar. On 4 December, the sol traded at 2.95 PEN per USD, which was 0.6% weaker than on the same day last month and 5.1% weaker on an annual basis. Moreover, this represented the weakest exchange rate since September 2009.
The ongoing depreciation comes amid a weakening outlook for the Peruvian economy. The slide also reflects falling commodity prices and markets’ expectation of a full normalization of monetary policy in the United States in 2015. These external factors are decreasing demand for emerging market assets and currencies, such as the Peruvian sol.
The Peruvian Central Bank has responded through repeated interventions in the foreign exchange market. The Bank sold USD 150 million and USD 50 million in the local market, on 2 and 3 December, respectively, to prop up the sliding sol. These are the latest in a series of moves designed to counteract the surge in local demand for dollars.