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In the history of humanity, 2020 will remain an atypical year, full of records and first times. The exchange market is no stranger to this reality and closes a year of high volatility that led the dollar to reach $ 4,000, a price never seen before, and to gain $ 155 compared to the TRM of December 31, 2019, which was $ 3,277. (TRM for today is $ 3,432).
(Why did the upward trend of the dollar return in Colombia?).
In fact, January was the month in which the dollar had its lowest price when it reached $ 3,250. However, this level rose rapidly and in just a few months it reached $ 4,000 pesos. Its most stable bottom throughout the year was around $ 3,600.
According to Alexander Ríos Posada, economic analyst at Inverxia by Strategic, 2020 was one of the most volatile years recorded in the Colombian market since the 2014 -2016 period, when the fall in international oil prices marked a devaluation path in the local currency.
(Who wins and who loses with the crash of the dollar).
This time, in retrospect, There were again major shocks in oil prices, but this time it was only a secondary factor to explain the behavior of the dollar throughout 2020.
WHAT HAPPENED?
For January Uncertainty factors were beginning to grow globally due to an unknown virus that was spreading rapidly in China, one of the main global financial markets and a determining player in world demand.
This generated the first devaluation movements in emerging currencies. In investment funds, professional and common investors with a more conservative profile began to withdraw their capital from economies with a certain degree of risk such as Colombia.
(The peso, the most revalued currency after the election of Biden).
However, it was not until the end of February, when the declaration of a pandemic was imminent, that the highest levels of upward volatility of the dollar were recorded in the Colombian market. This is mainly explained by two reasons: the outflow of capital seeking refuge in dollars, and the increase in uncertainty in financial markets due to the possible impacts of the virus on the economies.
In the first two weeks of March, the dollar in Colombia – and in general financial assets worldwide – suffered strong volatility shocks, going from $ 3,450 to $ 4,215 in its price in this period and thus reaching its historical maximum price.
By this time, Stock market prices globally, especially Colcap, fell sharply, returning to the levels of 2015 – and 2009 in the worst case – for the BVC.
For its part, the price of oil futures contracts was heading down sharply, even registering negative prices, something historic for the market.
Assets like gold, American treasures and especially the dollar as currency, were quickly demanded to the detriment of other riskier assets such as stocks and other securities, especially those denominated in currencies such as the Colombian peso, which at the time, came to be located among the five most devalued currencies of 2020.
For April, May and June, the uncertainty is based on the ground, the VIX volatility index for the North American market begins its decline and with it the appetite for risk investments begins to return among international investors.
A determining factor for this change in perception came from the strong global economic stimulus for the reactivation of economies, especially by the FED and the outgoing President Donald Trump, who enacted a fiscal stimulus similar to that of 2008 to the revival of the US
By this time, The dollar in Colombia begins its downward path from the steep $ 4,200.
Public fixed-income securities, especially hit by the capital outflow at the end of February, regain their attractiveness and with this, the currencies begin to reach the Colombian market again. The objectives gradually lowered the price of the currency to $ 3,750 pesos on average for the following months.
Just the news of a possible vaccine, the progressive lifting of quarantines, new all-time highs in the North American stock market and the slow but well on track recovery in employment and demand worldwide, reactivated the appetite for risk in riskier markets such as Colombia.
Finally for November, The dollar in Colombia achieves a break of the $ 3,700 pesos and begins its downward path towards the current $ 3,400, which leaves for this year-end an accumulated devaluation of only 4.84% for 2020, which means an impressive recovery from a devaluation close to 30% at its worst.
WHAT IS WAITING FOR US?
The road to full recovery from the impact of viruses is still long. The recovery in the employment and consumption rate will have a positive but slow effect on the real economy and in view of this the financial markets, especially risk assets such as local stocks, have begun an important process of appreciation, which has allowed a recovery of the Colombian peso, lowering the price of the dollar in the local market. However, uncertainty continues regarding the long-term effects of the vaccine and, of course, the latent risk of new outbreaks of the virus.
Issues of our economy such as a new tax and pension reform, together with elements of credit rating and fiscal sustainability, call into question the continuation of the downward movement of the dollar, Given this, a listing of between $ 3,200 and $ 3,500 pesos for 2021 seems reasonable, without neglecting the risks inherent to the international dollar and a possible overheating of the North American stock market.
FORECAST
For Inverxia by Strategic, the currency is clear about its short-term trading range between $ 3,350 and $ 3,500 if the downward trend remains.
To speed up the global commercialization of the vaccine and its good results opens a panorama below $ 3,300. If uncertainty is reactivated, the $ 3,500 pesos will once again be the closest bullish targets for the short term.
PORTAFOLIO.CO
