The dollar soared yesterday and following an inversely proportional behavior, the Colombian peso was ranked as the most devalued emerging currency of the dayand as the second most devalued in the last month.
After the North American currency hit highs of up to $4,153, the Colombian peso did not take long to express its downward trend, devaluing 2.90% in one day (taking as the last record at 3:30 pm on Thursday), a fall that placed it as the one that depreciated the most within the emerging markets, followed by the Hungarian forint (-1.12%), the Polish zloty (-0.97 %), the Czech crown (-0.86%), the Bulgarian lev (-0.68%) and the Romanian lei (-0.57%).
However, this was not all, since The Colombian peso also consolidated itself as the second most devalued currency in the last monthwith a depreciation of 6.24%, preceded only by the Mexican peso, which fell 8.86%.
All these moves led the market to set off the alarms and detect the reasons that led to the fall of the peso.where, until now, national and international situations are influencing.
On a national level, the market is waiting for the Medium-Term Fiscal Framework, which generates some uncertainty. “Since we know the Medium-Term Fiscal Framework, the markets seem to reflect greater risk aversion among foreign investorsgiven that we are estimating that this year it will not be possible to comply with the fiscal rule,” explained Gabriela Bautista, Central American analyst at Corficolombiana.
Furthermore, he pointed out that they consider that The adjustment of $20 billion announced by Minister Bonilla last week will be insufficient to guarantee the sustainability of public finances.
“In this context of growing fiscal risks and deterioration in economic activity that is already beginning to be reflected in lower tax collection, what we see is an exchange rate that finally seems to incorporate the winds of depreciation that we have been announcing since the beginning of this year, and that could deepen in the third quarter”Bautista added.
On the international side, the Mexican elections and expectations of lower rates at the Federal Reserve are weighing heavily. “We are seeing after the Fed, that perhaps the market is no longer pricing in further interest rate cuts in the US in the yearonly a drop, and that means that the dollar should not weaken so much,” said Wilson Tovar, manager of economic research at Acciones y Valores.
Besides, explained that in the region, concern continues in Mexico about the election of the new president and by how his power in Congress can change the Constitution.
Looking back to 2024, the Colombian peso is among the five currencies that have devalued the most so far this year with a depreciation of 7.06%; however, There are other currencies in the region that show worse behavior in the same period, such as the Mexican peso, which is the fourth most devalued in the year with a fall of 7.88%the Brazilian real, which occupies second place among the devalued ones with -9.45%, and the Argentine peso, which takes the title of the most devalued of the year, falling 10.39%.
