Of the 695 pesos that rose the dollar in March for the new coronavirus pandemic and due to the fall in the price of oil, until reaching a historical ceiling of 4,153.91 pesos on March 20, the price of the currency has already returned 686 pesos, with the particularity that half of that decrease occurred in the last month (355 pesos) and in the last week the reduction was 143 pesos, to settle at levels of 3,467 pesos on Friday.
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Behind the reduction in the exchange rate, which arrives like a glove for those who make their Christmas purchases abroad with a card, those who are buying plane tickets to travel outside the country and for importers, there are three main factors ; two of them international and one that has to do with Colombia.
According to financial analysts consulted by EL TIEMPO, the good news around the effectiveness of the covid-19 vaccine, that have increased the optimism of the markets, and the necessary liquidity that the central banks are irrigating in the world to boost the reactivations are the external and main factors that have led to the sagging of the dollar.
Even, according to Felipe Campos, Director of Research at Alianza Valores y Fiduciaria, since the announcement of the vaccine, the Colombian peso has been the most valued currency in emerging countries and was previously among the five most undervalued.
For Juan Pablo Espinosa, director of Economic, Sectorial and Market Research at Bancolombia, the announcement of the effectiveness percentages of the vaccine, reinforced by the UK’s decision to initiate approval of the same, has meant a very important change in the trend in the international financial markets, which, in view of the expectation that there will be a faster recovery due to this cause, have been increasing their risk appetite, which translates into a very large recovery in cash flows. investment towards emerging countries, including Latin America and Colombia, which has given a significant boost to the peso.
In other words, international investors, seeing that the situation is improving, decide to move their resources to invest them in assets that, although they involve greater risk, can generate higher returns.
Another key factor, according to Alejandro Reyes, principal economist at BBVA Research, is that given the magnitude of the global crisis that broke out, in order to guarantee the recovery and ensure the stability of the markets, the central banks increased the liquidity of the economies , which also affects an increase in available resources in dollars that reach all countries, generating not only a reduction in the currency, but also opening the appetite to buy shares.
In fact, according to Colombian stock exchange, From October 5 to Friday, the Colcap index had risen 14.8 percent, reflecting the appreciation of the shares.
“The liquidity granted by the main central banks of the world is unprecedented. This is due, eventually, to translate into a flow of resources looking for opportunities of value that will surely not be in economies with low interest rates, or that in the margin are not anticipated tax reductions or favorable conditions for production, as happened in the past. last years in the United States, ”he says.
The IMF effect
The third relevant factor for the drop in dollar, especially in recent weeks, it occurred in recent days, when it became known that the Government had been making the necessary arrangements for the disbursement of the resources requested from International Monetary Fund (IMF), through the flexible credit line of that entity, with more than 5,000 million dollars, which is expected to end in the remainder of the year.
In this regard, Juan Pablo Espinosa, from Bancolombia, explains that this will imply a significant arrival of dollars and a significant amount of monetization by the end of the year, which has led to a greater demand for pesos and the supply of dollars.
“We expect the trend to continue in the short term, perhaps not at the speed that has been in recent days, but the revaluation trend may persist in the remainder of 2020,” he said.
But are the forces pressing the dollar down Are they enough for a greater decrease to be achieved, even reaching levels of 3,282 pesos, which was the average for 2019?
In the opinion of Alejandro Reyes, from BBVA Research, although this is a possibility, it is complex to see it in the remainder of the year, since there is uncertainty as to when the vaccines will arrive or if there is a second wave that will generate saturation of the system of health.
And although forecasting the closing of the currency is complex, it will possibly be below 3,600 pesos, which is much less than what analysts expected a few weeks ago.
Reyes adds that a factor for the rise of the dollar is that in the last week of the year the trading volume falls a lot, due to the holidays, and this causes those who really need to close an operation, buy or sell, have the possibility of moving much the market.
“The global trend, if nothing extraordinary happens, is towards a cycle of appreciation of the peso due to the abundant global liquidity and the good relative return offered by local assets,” he said.
In 2021, the movement would be flatter
For analysts, surely the exchange rate profile in 2021 will be flatter than initially forecast, since what has been observed in recent weeks is an anticipation of a good part of the movement expected in 2021, when news of vaccines and improvements in the price of oil, among other things that were anticipated for the end of 2020.
“I think the most relevant, for the moment, is to consider that a good part of the stress observed in the currency due to the pandemic has disappeared. This reduces inflationary and cost pressures on public and private debt, ”stressed Alejandro Reyes, principal economist at BBVA Research.
And he adds that if the economy dodges the covid (infections and vaccines) in a positive way in 2021 and a recovery of economic activity is observed in line with anticipation or better, there may be room for the dollar to fall to levels of 3,282 pesos in the year 2022.
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