Will Banrep intervene in the foreign exchange market due to the rise in the dollar?

Given the historical rise that the dollar has had against the Colombian peso, there are several scenarios that have been proposed to stop the devaluation of the national currency.

(Read: Effects on ordinary citizens: what would rise due to the rise in the dollar).

Among them, there has been speculation about an intervention in the foreign exchange market by the Bank of the Republic. NHowever, Leonardo Villar, general manager of the institution, clarified what the steps to follow will be.

In principle, the senior official clarified that they have no intention of intervening in the foreign exchange market. He recognized, in turn, that the movements in this market have a direct impact on inflationary pressures.

However, he explained: “The Colombian experience and the international experience suggest that the best way to deal with this type of pressure is not with foreign exchange market interventions and it is better to let the market and the exchange rate move freely.“.

For the official, the market will generate its own defense mechanisms. “That the exchange rate movements directly express excess demand in that market through increases in the rate and excess supply through reductions in the same, helps mitigate capital movements and moderate the demand for foreign exchange,” he pointed out.

For Villar, only the foreign exchange market should be intervened in extreme situations, which are not current. “The exchange rate float that we have had in Colombia for more than twenty years has worked well and there is no intention to modify this type of policy,” he said.

(Also: How much are they selling the dollar in the country’s exchange houses?).

Although the dollar in recent weeks reached break the $4,600 barrierregistered a drop this Friday and stood at an average price of $4,393.92 with a TRM of $4,519.65.

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