The price of dollar in terms of suns, or the exchange rate as we know it, registered in January and February a monthly decrease of 1.2% and 0.9%, respectively. This is mainly due to two factors: the expectation of lower interest rate increases by the US Federal Reserve (EDF), and in the expectation of an agreement between China and the United commercial war.
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O exchange rate It went from S / 3.37 in December last year to S / 3.33 in January. This reduction continued in February to S / 3.30. This trend did not only occur in Peru but in several countries in the region and lasted until about March 21. This day, the dollar price fell to S / 3.29, its lowest price since August 13, 2018, which implied a reduction of the dollar by 0.3%, in the 21 days in March. What happened?, The Fed has announced that it will not raise interest rates this year, which has surpassed market expectations.
However, by the end of March, the situation has changed. The currency against the sun ended with an increase of 0.6%. Thus, after falling to S / 3.29, it rose to S / 3.32; that is, in almost a week, the dollar rose 0.9%.
This sudden increase was also recorded in our peers in the region. In this short period, the currency in Chile rose 2.1%, in Colombia and Mexico, 3.2%, in Brazil, 3.8% and in Argentina, 8.2%.
However, in the final result of the first half, the exchange rate fell in Peru (-1.5%), Chile (-2.1%), Colombia (-2%) and Mexico (-1% ). But in Brazil and Argentina they increased by 1% and 15%, respectively. You can know the evolution of regional currencies in the photo gallery at the beginning of the note.
In that sense, what are the factors behind the dollar? Is it true that a recession is coming in the US? What will happen to the Peruvian currency? Daniel Velandiachief economist Credicorp Capital, explains the The trade, what factors are behind the dollar.
Why did the exchange rate start to rise in the last week of March?
The good behavior of the exchange rate or the appreciation of the currencies until the March Federal Reserve meeting was explained by the expectation that the Fed would give a more positive message about its monetary policy and that it would not move its position. rates, and indeed was given; It even led the markets to incorporate the possibility that the next move in 2020 would be a rate cut. My feeling is that now the market is looking for reasons to take the coins in either direction.
What do you mean?
We have been talking about the increases in EDF rates since 2013 and six years later the central bank says it has arrived so far and there are no further interest increases, with which the market is left without one of the leading & # 39; ; from the market. exchange rate in the short term. Thus, the market passes the Fed's rate sheet and now focuses on economic growth.
There are monthly surveys that are made to market players around the world and point out that the main current risk factor is a possible slowdown in the Chinese economy and the trade war. The market lately reacts to data on economic activity in China, Europe, especially Germany and the United States. In these economies there have been many divergences in the indicators, some point to something more slowed down, others suggest that the world economy may not slow down at such a strong pace. For example, today several currencies have been appreciated.
What happened today in the foreign exchange market?
There is a very strong appreciation of the currencies on a global scale and it is because yesterday we knew the data from China which were better than expected and today there is a lot of favorable information about the possibility of an agreement between China and the US. UU for the commercial war.
What explained the recovery of the dollar in the last week?
Between March 21 and March 31, there were bad data; that is why currencies have devalued [El tipo de cambio ha subido]. But I would also say that there was a profit due to the good returns achieved during this year.
Between January and March, with the exception of Brazil and Argentina, the other currencies of the region are appreciated, what is happening with the currencies of these two countries?
I would stress that after the EDF meeting in March the focus of market changes and risk aversion increased. In fact, this aversion occurred when US bond rates fell sharply. These papers were trading at rates close to 3.30% in October last year to 2.40% today. This reflects not only the lower interest rate context, thanks to what the Fed has done, but the possibility of lower economic growth in the future. Thus, uncertainty has done the usual, when it increases it generates that the most punished coins in the region are those with less solid foundations and evidently Argentina and Brazil are the worst foundations.