The price of dollar Regarding the Sun, it has fallen to more than 5 years levels in recent days. For example, in today’s session, in the interbank market, although it closed with a small climb, the green ticket reached a minimum level of S/3,472. Already so far this year, the currency has lost value at 7.5%.
This arises the question about how much more can lose the dollar. Hugo Perea, chief economist for Peru BBVA Research He affirmed that there are both external and local factors that have originated the weakening of the green ticket on a global scale.
He cited as an example the evolution that the dollar index (DXY) has had, which measures the value of American currency in front of a foreign currency basket. He said that, so far this year, the dollar has lost 10% of its value compared to other relevant currencies. He indicated, however, that the euro has appreciated 13% against the dollar in the same period and a similar behavior has occurred with the Japanese yen, which has risen 6% against the green ticket.
“Libra sterling has also appreciated 8%,” he said.
What gigs the dollar in the global field?
Perea points out that among the external causes of the drop in the dollar are those associated with the impact of the economic policy of President Donald Trump, factors to which the economist calls structural.
He explained that global investors have preferred to reduce part of their portfolios that maintain in dollars, due to the volatility experienced by the currency, associated with the actions of the Trump administration.
“We are talking about the fact that the commercial war is taking an invoice (at some point it was proposed to impose an additional tax on the holders of bonds that come from countries that have acted, in tax terms, asymmetrically with the United States. All this generated an exit from the demand for bonds,” he said.
Short -term factors
Perea added that, within the external factors, the conjunctural ones as the most recent data in the US economy, which increase the expectation that the Federal Reserve of the United States (Fed) will cut its interest rate in the monetary policy meeting next week, of September 16 and 17.
“When the Fed rate is reduced, the dollar tends to weaken,” he explained.
He pointed out that the expectation of reduction of FED rates is due to the fact that weak data of the US labor market have recently left.
“Even the most recent data gives a perception that the US economy is weaker than it had been anticipated. Although it introduces some doubts about inflation, which does not end up converging towards the objective level that the central bank wants that is 2%,” he said.
“But in the balance, the markets today are very confident that the Fed cuts its rate next week. That weakens the dollar and has made, for example, that the yields of the 10 -year American treasure bonds are falling 30 basic points, so far in September,” he said.
In addition, according to Perea, everything indicates that more reductions in the Fed rate will come because the US economy is showing signs of weakness.
“If the dollar weakens, other currencies are strengthened and among them the Peruvian currency, which so far this year has appreciated 7%,” he noted.
Local factors
On the local factors that explain the fall of the green ticket, said the surplus recorded in the commercial balance. He said that, due to the high prices of export raw materials, a good amount of dollars to the Peruvian economy has entered.
“This entry of dollars not only obeys copper, but also to the highest gold prices. Also, in recent days, we have seen the entry of dollars aimed at investments in portfolio. Many of these for the purchase of Peruvian treasure bonds.” Indian.
He added that there has been sale of dollars from some mining companies that, unlike other occasions, have advanced to detach themselves with dollars to make their payments.
How much more can the dollar lower?
According to Perea, the story shows that, in electoral situation, it is common for people and investors to take defensive positions, that is, they bet more to the dollar than the sun. This would unleash a greater demand for dollars, “but it will not be a significant correction,” says the economist.
He pointed out that it is quite likely that the dollar fluctuates between S/3.5 and S/3.55 towards the end of the year, but not beyond that.
Pera argued that you must also wait for the decision that the BCR can make with respect to the future of its reference rate that will be communicated in the afternoon.
He argued that a good part of the market expects a rate cutting to be, which, if not it would represent a surprise and that would make the exchange rate fall a little more. But if the BCR cuts the rate, it would have already been incorporated into the price of the currency.
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