Daniel Velandia, executive director of Economic Research at Credicorp Capital, pointed out that the rise in the dollar is the result of a “combination of global and local factors.” One of the main global factors is the change in the projections of the United States Federal Reserve. “Indeed, the continuous systematic change in projections regarding what the Federal Reserve is going to do in the United States has generated significant pressures in recent weeks,” he said.
At the beginning of the year, it was expected that the Federal Reserve would cut its interest rate. However, only one or two cuts are now expected, which has strengthened the dollar globally. “The market expected that the Federal Reserve would cut its interest rate almost sixfold this year. Now they are only expected between one and two times and that has strengthened the dollar a little globally in recent weeks,” Velandia explained.
On the other hand, the high level of the interest rate in Colombia has somewhat moderated the flow outflows and has encouraged the entry of investments into the fixed income markets. “We hope that at this month’s meeting (the Bank of the Republic) will cut its rate again by 50 basis points. That would leave Colombia’s interest rate at 11.25%, one of the highest in the world,” Velandia indicated.
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