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For COVID-19 vaccines the exchange rate has dropped almost $ 400 in the last month. Analysts recommend buying dollars as it could rise again.
In the last month, since the results of the first vaccines against COVID-19 were known, the Colombian peso has experienced a strong appreciation: the exchange rate has lost almost $ 400 since the beginning of November, and closed this week at $ 3,465. It is a price similar to that of the beginning of March 2020, before the first case of coronavirus was registered in Colombia.
In fact, it is a behavior as strong as the devaluation that the peso had in the hardest moments of the pandemic. Only in March 2020 the currency gained almost $ 700 and reached the record of $ 4,180.
The recent drop in the exchange rate is largely due to the record investment that came to emerging markets in November due to optimism about COVID-19 vaccines.
According to the Institute of International Finance (IIF), fund managers added about $ 76.5 billion to bonds and stocks from developing countries in November, the largest monthly inflow on record.
Stocks alone attracted $ 39.8 billion in inflows, while $ 36.7 billion went to debt.
Likewise, the Colombian economy overcame the challenge of risk rating agencies during the pandemic: in the last month Fitch, Moody’s and Standard & Poor’s maintained the country’s investment grade. However, all the ratings (of the three firms) have a negative outlook, and strong warnings were made of the need to reduce the government’s debt.
Analysts do not rule out that the dollar will continue to decline in the coming weeks, as the effect of vaccines still persists within the market. In addition, recent announcements, such as the new production agreement of OPEC and its allies, boost oil prices and consequently lead to falls in the exchange rate.
However, a rally cannot be ruled out either. “Colombia is a market that tends to overreact to announcements in the currency market. So, this situation should be taken as an opportunity to buy dollars, since I believe that further increases in the exchange rate are expected once the effect of optimism regarding vaccines passes, ”explained Diego Franco, president of Franco Group SA.
