Peru: Sol reaches strongest level in 15 years despite Central Bank's intervention
August 31, 2012
The Peruvian sol (PEN) continues to consolidate near the PEN 2.60 per USD support. On 31 August, the Peruvian sol traded at 2.61 per USD, which was 0.6% stronger than the previous month. In annual terms, the sol has gained 4.4% compared to the same month last year. Moreover, during the trading session in 5 September, the Sol traded at 2.60 per USD, the strongest level seen in 15 years. Following the upward trajectory in place since May, the strong appreciation of the sol in August reflects the boost in short-term capital inflows, which are being fuelled by high foreign liquidity on the back of stimulus measures by the European Central Bank as well as an increased appetite for higher-yield assets in emerging markets. Consequently, the Central continues to intervene in the exchange market and, on 11 September authorities purchased USD 595 million. With the latest intervention, the Bank has purchased a total of USD 10.2 billion so far this year.
Author: Ricardo Aceves, Senior Economist