Peru: Sol closes 2012 at highest level in over 15 years
January 18, 2013
On 31 December, the Peruvian sol traded at 2.55 per USD, which was 1.0% stronger than the level seen at the end of the previous month. In annual terms, the PEN gained 5.3% against the greenback, and reached its highest level in more than 15 years.
Following the uninterrupted upward trend in place since May 2012, the strong appreciation of the sol by the end of the year was mainly the result of large capital inflows, spurred by mining investment and an increased appetite for higher-yield assets in emerging markets. The currency has maintained its strength at the start of 2013, as the Peruvian sol continued to trade at 2.55 per USD by 18 January, consolidating its new support at that level.
Consequently, the Central Bank continues to intervene in the exchange market and, on 18 January, authorities purchased USD 20 million. The Central Bank has already purchased USD 1.4 billion so far this year. In 2012, the Central Bank purchased a total of USD 15 billion in order to slow the pace of the currency's appreciation.
Furthermore, on 18 January, the Central Bank approved to raise the limit for investment abroad by private pension funds (AFP), from 30% to 32%, in a move that aims at offsetting capital inflows "in an environment with a significant inflow of foreign currency in the country". The decision provides AFPs additional USD 750 million to invest in international markets. The previous increase was implemented in September 2010, when the limit was increased from 28% to 30%.