Peru Exchange Rate

Peru

Peru: Peruvian sol depreciates amid declining outlook and shift in U.S. monetary policy

October 8, 2014

The Peruvian sol (PEN) has been losing value against the dollar in recent weeks. On 29 September, the sol traded at 2.90 PEN per USD, which was 1.8% weaker than on the same day last month and 4.1% weaker on an annual basis. Moreover, this represented the weakest exchange rate since November 2009.

The depreciation comes amid a weakening outlook for the Peruvian economy and as markets have begun pricing in a normalization of monetary policy in the United States. The Fed is set to end its bond-buying program this month and is expected to begin raising interest rates as early as Q2 2015, which is decreasing demand for emerging market assets and currencies such as the Peruvian sol.

The Peruvian Central Bank has responded by intervening in the foreign exchange market. On 7 October, the Bank sold USD 10 million in the local market to prop up the sliding sol. This was the latest in a series of moves designed to counteract the surge in local demand for dollars.

LatinFocus Consensus Forecast panelists expect the sol to recover somewhat in the coming months, with the exchange rate ending this year at 2.86 PEN per USD. Next year, the panel sees the sol trading at 2.90 PEN per USD.


Author: Ricard Torné, Lead Economist

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Peru Exchange Rate October 2014

Note: Exchange rate, PEN per USD (eop).
Source: Central Bank (BCRP, Banco Central de Reserva del Peru)


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