In June, the price of the dollar in Colombia has experienced a notable increase, reaching $4,150 last Fridayvery close to its highest point in the last seven months.
This upward trend has represented a 7% depreciation of the Colombian peso in just three weeksranking as one of the most pronounced among emerging economies.
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Corficolombiana’s weekly report reached these two major conclusions. The report indicates that the relative stability of the exchange rate observed in the first five months of the year has been interrupted by a series of both external and internal factors.
For example, Between January and May, the Colombian peso moved in a range of $3,740 to $3,990, supported by several elements, the wide interest rate differential between Colombia and the United States maintained stabilityas well as the reduction of the current account deficit marked by the fall in imports due to weak domestic demand.
Also highlighted was the seasonal inflow of foreign currency from tax payments and flows generated by public acquisition offers (OPAs) of Nutresa. And a soft landing of the global economy and high prices for raw materials, especially oil.
The report, edited by Cesar Pabón Camacho, executive director of Economic Research at Corficolombiana; and written by Julio Romero, chief economist; and Gabriela Bautista, Research analyst, explained that The recent depreciation of the Colombian peso reflects changes in the external context, such as the electoral result in Mexico, with the triumph of the ruling party.
This generated expectations of structural reforms and pressure on fiscal accounts, negatively impacting the Mexican peso and, by correlation, the Colombian peso. In addition, The strength of the dollar influenced because the restrictive stance of the United States Federal Reserve (Fed) has strengthened the dollar.
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And also a drop in oil prices, influenced by Opec+ announcements about reducing production cuts, has contributed to the depreciation.
At the local level, the weekly report highlighted several factors that have intensified the depreciation of the peso. For example, The publication of the Medium Term Fiscal Framework generated nervousness in the markets on the government’s ability to comply with the fiscal rule, despite a significant spending cut.
Also the doubts about fiscal stability in 2025 and the possibility of a credit rating downgrade have added pressure on the currency.
Corficolombiana, in its report, anticipates that most of the factors that have led to The depreciation of the Colombian peso will continue in the coming months.
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The exchange rate is expected to remain between $4,150 and $4,350 for the rest of the year. Although oil prices could stabilize, the acceleration in the reduction of rates by the Bank of the Republic and fiscal doubts could continue to negatively affect the currency.
In conclusion, Corficolombiana estimated that the depreciation of the Colombian peso is not only the result of external factors, but also of internal vulnerabilities. With an uncertain fiscal outlook and a restrictive monetary stance in the United States, the price of the dollar in Colombia is likely to continue showing volatility and upward pressures in the short and medium term.
