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Peso...

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morganstern
  8/29/2019 12:30 EST

Today, as of 11:30 A.M., the action in the Peso is weird....as if it doesn't want to go down anymore, for now. Hope I am wrong.

WhoaNellie
  8/29/2019 13:30 EST

3457 COP for 1 USD (as of 4:09 PM UTC) is down??? Sounds pretty "up" to me, although it had reached over 3475 for a short while.

I'd expect some variation day-to-day especially at this high level - which I do not believe can be sustained "forever" (of course not) and which is certainly higher than it's been for quite some time. What goes up must come down! Enjoy your flight, but please make sure your seat belts remain fastened!

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SkyMan
  8/29/2019 18:41 EST

morganstern...Let's all just enjoy the current ride...concerning the US Dollar vs. COP values. Buena Suerte !

morganstern
  9/5/2019 14:54 EST

Like I said....the peso was acting like it did not want to go down for the time being had rewards us with 100 few peso off the top.

Today I withdrew pesos using my U.S. debit card. FX spot rate on the net is 3374 and I received 3438. Weird to me. This was at about 12:30 or 1 PM.

guestuser
  9/5/2019 16:50 EST

There are a series of factors that drive the peso, and we saw a combination over the past few days

Oil went higher on Wednesday based on potential Chinese demand and today’s news that US reserves came in lower than expected. Higher oil, being a net exporter, helps the peso.

A US interest rate cut sometime this month seems likely which would, by nature reduce the dollar.

Talk of China/US talks on trade, and therefore the potential for a better global economic situation will have helped emerging currencies like the Peso.

One thing to bear in mind is that the denomination of the peso, say as 3,400 can often appear to amplify moves. Today’s move of 20 pesos is only 0.5%, not an unusual days range for an emerging currency.

In a generally good news day Avianca was again an outlier dropping 2.6% by the close of day to a new low. During the day it traded even lower than that levels.

guestuser
  9/5/2019 19:05 EST

@ponymalta

With any emerging country there is always more of a bias to a weakening of the currency over time rather than any strengthening. Personally I see more negative threats to the peso short and medium term than things that would strengthen it. However others on here have suggested I am too negative on the price if oil,

I personally don’t see a major crash ( say like the Argentine Peso) in the next six months unless we hit a major global recession. Colombia’s economy is doing rather better than most in the region. The country’s finances are in a reasonable state and the bond ratings are stable.

In the past twelve months we’ve gone from around 3,100 to 3,400 or just less than 10 percent.,part of that is dollar strength, part part of a general Peso crawling peg lower. There’s some thought that given the recent declines in the peso might be overdone but oil and the strain that the Venezuelan influx is putting in on the Public Finances don’t help.

My guess we’ll see 3,500-3,600 in the next few months and my bias to lower rather than a stronger Peso would be about 80/20.

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guestuser
  9/17/2019 09:17 EST

Just an update.

La Republica ( the Colombian equivalent of the WSJ or the FT) today published an article on end of year 2019 rate projections from about thirty institutions. Whether the projections were all made at the same time and whether later ones reflect the current unrest in the Gulf isn’t clear. However

At the top end you have Alianza and Moody’s predicting 3,450. Others at or above 3,400 include Citi, Itau, Casa de Bolsa and JPM.

On the bottom end Scotiabank has 3,120, Bancolombia is at 3,180.

There’s a whole host of local banks around 3,300 including BTG and Davienda.

The article falls to the 3,300 theory. That has some issues. Averaging or finding the most popular pick doesn't usually work in these cases. Also guessing the rate will effectively be unchanged is a popular but dubious approach.

There are also 2020 EOY predictions and they are even more interesting. Either they show little change from the 2019 (Alianza and Moody’s go to 3,500) but many show an improving Peso. Citicorp shows a modest improvement to 3,376, there are many estimates in the 3,150-3,200 range and even a couple at 3,000 from smaller financial companies

So plenty of diversity in the numbers. What is probably interesting )at least through EOY 2020 no one is predicting a Peso meltdown and many see 2020 as a better year for the Peso than 2019.

In most cases the local companies have a rosier view of the Peso than foreign ones.

I’ve still the view that the peso will continue a slow decline, but if the Gulf heats up a lot of the gains that expats have enjoyed in the Peso depreciation this year could quickly disappear.

morganstern
  9/17/2019 09:34 EST

Peso and oil.....the price of oil has just jumped. The peso yawned about the whole thing. Sooo....it is time for you all to give up your analysis of peso movements based on world oil prices. There don't correlate in a proven way.

Elexpatriado
  9/17/2019 10:20 EST

Because the US is basically energy independent

guestuser
  9/17/2019 10:38 EST

@morganstern the positive correlation between peso moves and oil is around 46% higher than most petrocurrencies.

Oil prices moved sharply higher after the attack on the refineries. Today oil is regaining much of the losses.

Sharp shocks like that aren’t going to impact the peso straight away. It’s never going to be that Oil shoots up 12% and the Peso does the same on the same day.

But a war in the Gulf, with the Straits of Hormuz closed or near closed to shipping for some period of time would have a much greater impact on the price of oil and so on the Peso. For all the talk of strategic reserves to mute price changes there are limitations and complications in utilizing them effectively. The world would suddenly be short of oil.

In a scenario where we got back to $100+ for oil, which some speculate we might reach if there is a war Colombia’s revenues would surge.

Remember it was the fall in oil prices 2015-2016 that brought us from around 2,000 to the dollar to where we are now. Oil got to under $30 a barrel at that time. If that’s not correlation, I’m not sure what is.

guestuser
  9/17/2019 10:49 EST

@elex just how energy independent the US is a debatable subject and isn’t as simple as some politicians profess.

However I don’t get your point.

Are you suggesting that because the US is now much less dependent on imported oil there’s no longer any correlation between the Peso and the price of oil? Oil is a global market (the US is but one user). Oil prices go up, revenues flow to the Colombian Treasury. Colombia has more money. Even the fact that oil is priced in dollars means that the Colombian government receives more dollars, which it then sells for domestic use in pesos. That increased demand for Pesos drives up the price.

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Electricista
  9/17/2019 11:19 EST

The peso did not respond to the two day oil price spike because it was a temporary movement. Trump also talked the oil price down by saying he will relax the oil reserves. As I am supporter of the Keynesian economic models, I believe the long term price of oil and the long term value of the Colombian peso have a direct propositional relationship because currently oil makes up a significant portion of Colombian exports.

Elexpatriado
  9/17/2019 11:27 EST

There was no attack on "Refineries".

The attack was on Abqaiq Crude oil Stabilization facility and th Kurais GOSP (Gas OIl Separation Plant)

Elexpatriado
  9/17/2019 11:43 EST

There has been a disconnect between the price of oil and the paso recently.


Thereis still a relation, but it is not as direct as it was even 2 years ago.

Oil is a smaller part of the Colombian GNP over all.compared to 5 years ago.

Colombian reserves and production arent that great

Whereas US production has grown dramatically in the last 5 years

The comparison is Dollar to Peso

Canada produces way more oil and bigger reserves than Colombia and the Canadian dollar has been pretty close to 75 cents even though WTI has varied from $30 to $65 in the last 5 years.There was a little variationin 2016, but the petro currency differences to the US dollar are not as sensitive to oil prices as they used to be.

This is because the US, unlike European countries, werent stupid enough to ban the goose that laid the golden egg- Fracking-even under Obama`s watch

If oil goes to $100, I doubt oil will stay above that figure for long., for various reasons. Mostly, nobody wants a war in the Mid-east, espescially before an election year.

There might be some bombing of Iranian military bases though.

Elexpatriado
  9/17/2019 11:47 EST

Did you ever work for Aramco Electrista?

I was in that Sh1thole for 3 years...

I still have dreams about it. Nightmares last night.

Dreamt they recruted me to rebuild Abqaiq

morganstern
  9/17/2019 12:44 EST

"But a war in the Gulf, with the Straits of Hormuz closed or near closed to shipping for some period of time would have a much greater impact on the price of oil and so on the Peso. For all the talk of strategic reserves to mute price changes there are limitations and complications in utilizing them effectively. The world would suddenly be short of oil."

If if if....your aunt had balls she's be you uncle.

guestuser
  9/17/2019 12:46 EST

@elex thank you for your clarification. One of the stabilization processes is a form of partial distillation. Refining does include distillation but your terminology is certainly more correct.

On energy independence that doesn’t mean US consumers are protected from shifts in energy prices. If crude is $100 a barrel US Energy companies aren’t going to be selling gas at a $60 level, the consumer is still going to be hit.

Energy independence (and the US is not yet a net exporter, that comes next year despite political comments to the contrary) means that the balance of trade won’t be negatively impacted if oil prices rise. Not a bad thing, but increased energy costs would impact consumers and industry alike.

And still nothing that impacts any preexisting correlation of the Peso and Oil.

guestuser
  9/17/2019 13:06 EST

@elex yes it’s correct on the proven reserves but there are projects underway in looking at other fields (like in the Caribbean) that would significantly change those reserves. It might not be cheap to extract and there might be other issues but it has potential for Colombia.

Again not sure why the US expansion (which has had its issues) becomes part of the Peso discussion. Colombia is a small economy (put it this way Orange County has a slightly smaller GDP) so even small increases in revenues for the Colombian Treasury can has impact in the exchange rate and its direction.

Why did the Peso fall so hard five years ago along with Oil prices? How does US expansion change that?

Generally the Peso/Dollar equation is far more about the health of the Colombian economy than the US. It’s rather as if the Peso pivots around the dollar. It’s not the other way around.

Electricista
  9/17/2019 16:45 EST

@Elexpatriado “Did you ever work for Aramco Electrista?”

No. But I did work at Arco and BP refineries in Ferndale WA and the Chevron refinery in Burnaby BC. All refineries are $h1tholes during the winter when one is exposed to the elements and breathing cancer causing fumes.

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