The price of the dollar: why is it rising so much against the peso in Colombia? – Sectors – Economy

According to data from the Colombian Stock Exchange (BVC), the dollar foreign exchange market opened at $4,280, which later reached a maximum price of $4,397, but finally closed at $4,353.50. The historical maximum cost of the mentioned currency in the country.

so it is, The representative market price (TRM) in effect for Thursday, July 7 is $4,354.50.

The dollar has been boosted around the world thanks to the monetary policy adopted by the US Federal Reserve (FED), which seeks to deal with high inflation in the US.

The measure implemented by the Federal Reserve not only devalued the Colombian peso, but also favored other currencies such as the euro, which was at its lowest level in 20 years, compared to the North American currency last Tuesday, June 5.

Concerns for the health of the global economy are clear and this is the reason for the decline in the stock markets, oil and industrial metalsAnalyst David Madden, of Equiti Capital, explained to ‘AFP’.

(Also read: How are other Latin American currencies against the dollar?).

For the case of Colombia, At the moment, many global and local phenomena are gathering in favor of the devaluation of the peso against the dollar.. Andrés Giraldo, Professor and Director of the Department of Economics at Pontificia Universidad Javeriana, explained to EL TIEMPO what these factors led to the fall of the national currency.

Global reasons for the rise in the price of the dollar

The first thing to understand is that the price of the dollar in Colombia is not determined by anyone, it is about supply and demand … Now there is little supply‘, the most prominent expert.

The dollar continues to rise globally. Reached the highest value against the euro.

(Interesting: Five Answers to Understanding Why the Dollar Has Ever Been Higher.)

According to Giraldo, as mentioned above, The US is raising interest rates, which means there are fewer dollars circulating in the global market. However, in the face of a possible recession, investors are turning to the dollar, which increases demand.

There is also an increase in demand because, since there is a threat of recession in the US and therefore around the world, people are starting to look for safe assets and one of them is the dollarr,” added Giraldo.

Added to the economic situation of the North American country is the war between Ukraine and Russia Which, as is known, caused the prices of some commodities and supplies that were exported by the concerned countries to rise.

Not in vain, according to the International Monetary Fund, the conflict in Europe is leading to high inflation and problems in international trade and supply chains, already affected by the coronavirus pandemic.

Concerns for the health of the global economy are clear and this is the reason for the decline in stock markets

(You can read: The Dollar: Who Benefits or Hurts Its Rise?).

added to this Economic consequences of the arrival of COVID-19where governments had to actively intervene in the fiscal policies that raise prices today.

These global phenomena lead to a high degree of uncertainty and people want to resort to safe assets, so they go to the dollar‘ concluded Professor Giraldo.

Domestic reasons for the rise in the price of the dollar

Another reason for the dollar’s appreciation against the Colombian peso, in domestic terms, is the election of President Gustavo Petro. Or, in other words, the market uncertainty about the new president’s decisions on financial and pension terms.

(We recommend: Is it a good time to sell your dollars?).

dollar (vertical)

An increase in the demand for dollars leads to an increase in the exchange rate.

Not because there is a bad perception of the economy under the Petro government, but because there is a certain degree of reserve. More than certainty that something bad will happen, is that there is a lot of uncertainty, so people keep a portion of their dollar assetsThe professional explained.

This increased demand for the dollar in the country contrasts with the decrease in the supply of currency, which affects the price of the US currency in the country..

In addition, there is concern at the national level about what could happen to the mining and energy sector, as it remains unclear what decisions the historic charter leader will make regarding hydrocarbon extraction.

(Also: Ecopetrol stock continues to be affected this Wednesday with crude below $100.)

Expectations on this issue lead to a decrease in the future supply of the dollar: “The fact that Colombia stops exploration for hydrocarbons even if there are exploitation contracts in place, generates great uncertainty as shortages of dollars across the mining and energy sector will be sooner rather than later.“.

Finally, Javeriana’s teacher sees another factor at the national level interfering with the devaluation of the peso is external public debtwhich is more than $100,000 million, according to March 2022 data from Banco de la República.

Colombian Peso

The depreciation of the Colombian peso is due to several global and local factors, especially what is happening today with the global economy.

“It could have a negative impact on us because if you have dollar debt and you increase that debt, you have to pay more interest, but because you earn in pesos, you have to work harder to be able to pay off those dollars,” the expert said. on currency appreciation.

(Read: the ‘Queen of Cryptocurrencies’ who cheated in dozens of countries and disappeared.)

for Geraldo Currency devaluation is a global phenomenon given the current context, but in Colombia it becomes more pronounced due to the environment of uncertainty at the economic level who lived before the presidency of Gustavo Petro.

Devaluation is happening all over the world, and Colombia is no stranger to it, but it is a little higher in the country because people may give their investments a leeway and, at the same time, turn to dollars.“.

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