The Peruvian sol is one of the most volatile currencies in Latin America.
The price of the US dollar in Peru closed higher on Tuesday, while the markets assimilated inflation data in the United States that was as expected and increased the probability that the Federal Reserve will adopt a less restrictive monetary policy .
While, at the local level, the Minister of Economy and Finance, Alex Contreras, pointed out that a significant recovery of the Peruvian economy is expected for March of this year, after the decrease in social conflict. In addition, he predicts that this year the Gross Domestic Product (GDP) of Peru will grow at a rate of more than 3%.
In this context, the exchange rate ended the session on Tuesday, February 14, at S/ 3.8610 per dollar, registering a slight rise of 0.09% compared to Monday’s close when it was quoted at S/ 3.8600, according to updated data from the Central Bank. of Reserve (BCR) of Peru.
So far this year, the greenback accumulates an advance of 1.42% compared to the last price of 2022, at S/ 3,807. Likewise, today (Tuesday), USD 483 million was traded in the market at an average price of S/ 3.8609.
The price of the US currency in the parallel market or exchange houses is S/ 3.89, while in the windows of the main banks in Peru it is quoted on average at S/ 3.94.
Exchange Market Information – BCR
On Monday, the Peruvian sol along with the Argentine peso were the currencies that depreciated the most in the region. Both currencies are positioned among those with the lowest yield against the dollar so far in 2023, compared to other currencies of emerging and Latin American countries.
According to the ranking of the main currencies in Latin America, prepared by Bloomberg, the Peruvian sol is the second worst performing currency in Latin America with a depreciation of 1.4%, followed by the Argentine peso with a fall of 7.6%.
However, so far the Chilean peso is the best performing currency than its regional peers with an appreciation of 7.3%. It is followed by the Mexican peso (5%), the Costa Rican colon (3.2%), the Uruguayan peso (2.3%), the Brazilian real (2.1%), the Colombian peso (1.4%), the Paraguayan guaraní (0.8%) and the Dominican peso (0.8%).
The exchange rate in Peru could close between S/3.80 to S/3.90 by the end of this year.
So far this year, the BCR has carried out spot operations on the trading table for USD 1 million and has auctioned foreign exchange swaps, with which the balance of these operations has increased by USD 111 million.
Regarding exchange rate expectations, according to the BCR, in January they are between S/ 3.85 and S/ 3.90 per dollar by the end of 2023 and an expected range between S/ 3.85 and S/ 3.96 per dollar for the closing of 2024.
And if the political and social situation in the country remains calm or is regulated, the US currency could oscillate between S/3.75 and S/4 this year, according to financial analysts.
The trend towards dollarization of the Peruvian economy has been fostering the increase in new digital businesses throughout Peru, which is why the presence of online exchange houses, the most popular business model in the region, is projected to multiply this 2023 , according to Omar Azañedo Sayán, CEO of Noncash.
According to the economist, the price and exchange of the national currency to the dollar continues to be the commercial transaction that is carried out the most daily in all economic and commercial activities in the country.
“The vast majority of obligations such as rents, payments to suppliers and various financial products are made in dollars, as well as any investment, acquisition or purchase of assets, is made in the US currency,” explained the expert.
This morning, in some exchange houses, the dollar was already quoted at S/ 3.89.
This favors the increase of digital businesses, especially online exchange houses, which is a business model that has been occupying an important presence in Peru.
According to Noncash projections, it is expected to carry out more than USD 1,500 million in foreign exchange transactions by the year 2025, and they are looking for 1% of the foreign exchange market, which is estimated at more than USD 150 billion annually.
In addition, it is projected that the presence of online exchange houses in large districts of the capital and within the country will multiply this 2023.
At the start of the trading session this morning, the US dollar was paid at closing at S/ 3.84 on average, so it represented a change of 1.51% compared to the value of the previous trading session, which was S/ 3.78 on average.
Taking into account the last seven days, the US dollar marks an increase of 0.34%, so that in the last year it still maintains an increase of 3.29%.
Comparing this data with that of previous days, it put an end to two negative trend sessions. In reference to the volatility of the last week, it is lower than the figure achieved for the last year (17.9%), which indicates that in this last phase there are fewer changes than normal.
This is the behavior of the US currency during the last minutes of the day in Peru.
The sol has been the legal tender in Peru since 1991 and replaced the inti, which circulated between 1985 and 1991. At first it was also called the “nuevo sol” to differentiate it from its predecessor, but by 2015 it was called only sun.
The origin of the nuevo sol is understood after the world crisis of 1929, which led to a deep economic and exchange crisis in the country, as well as the creation of the Central Reserve Bank of Peru. It was during the first year of Alberto Fujimori’s government that the nuevo sol was promoted to balance hyperinflation and reorganize the economy.
After entering into force, a sol was equivalent to a million intis or a thousand million “old” soles; currently the currency is divided into 100 cents and its issuance is regulated by the Central Reserve Bank of Peru.
The rise in the dollar responds to higher interest rates in the world and global uncertainty.
At present, coins of 10, 20, 50 cents, 1, 2 and 5 soles and bills of 10, 20, 50, 100 and 200 soles are in circulation. Before, 1 cent coins were also minted, but these were withdrawn from circulation in May 2011, while in January 2019 the 5 cent coins went out of circulation.
On the other hand, the exchange parity with respect to the dollar and the euro is set daily by the agency in charge. It should be noted that since 2014 the Peruvian currency has been depreciating.
2022 ended in a turbulent way for the Peruvian economy and among the main concerns or challenges for 2023 is high inflation, low private investment and the continuous increase in interest rates.
Although last year all the economic activities that had been affected by the coronavirus pandemic were restarted, the recovery has shown slow progress due to the crisis that is still being experienced in Peruvian homes.
In addition, in its latest report, the National Institute of Statistics and Informatics (INEI) announced that poverty has increased in the last three years and it probably cannot be reduced this year due to the impact of higher inflation.
With a political crisis involved, 2023 looks to be a challenging year on the economic issue, however, the latest estimate from the Economic Commission for Latin America (Cepal) Peru could grow up to 2.2%.
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