Dollar Outlook in Colombia: What to Expect in the Coming Weeks

2024-07-21 20:12:00

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Photo: Bloomberg – Paul Yeung

This year the dollar has had ups and downs, but as Álvaro Humberto Ojeda, Executive Vice President of AAA Values, BVC Investment Banking, explains, in general it has reflected the market’s outlook. So far this year, the minimum price on the Representative Market Rate in April was $3,764 and the maximum was $4,175 last month.

Among the factors that have influenced the behavior are decisions on interest rates in the United States, the economic recovery after the pandemic, the behavior of inflation, international wars and tensions affecting the confidence of funds and investors, and the price of oil.

“The volatility of the dollar is in line with expectations, with a high volatility of around $200. Currently, the exchange rate oscillates between $3,900 and $4,100 pesos, which is expected,” says Sergio Olarte, chief economist at Scotiabank Colpatria.

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On Friday, the dollar closed at $4,037.90. The Representative Market Rate for this Monday is $4,040.20.

Olarte said that the behavior of the exchange rate of the peso against the dollar in the past week was mainly influenced by the risk appetite of the international markets. Recent news about the possibility that the Federal Reserve of the United States (FED) could lower interest rates in September, as well as the prospect of the presidential campaign in the United States, generated volatility.

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What will happen to the dollar in Colombia?

It is complicated (if not impossible) to predict the future of the dollar, considering that its behavior is influenced by national and international variables.

Olarte points out that exchange rate volatility in Colombia has been significant over the past week, with fluctuations of more than $70, although within a relatively stable range. For the next week, he expects similar behavior, “with a focus on the election campaigns in the United States and the possible decisions of the central bank of that country.”

Ojeda agrees that the monetary policy decisions of the United States Federal Reserve may influence the behavior of the dollar, since although the meeting is on July 31, indicators of future policies can influence the currency, since which this week presents important details. “If the information on economic states from the United States is strong and stable, we could expect a strengthening of the currency. On the contrary, if the data is not solid, the dollar could weaken.”

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Diego Franco, Head of Investment at Franco Capital Asset Management, indicates that the dollar has trended upwards in the past week, which he attributes to situations of uncertainty at the international level, but also to the corruption scandals in the country that raise doubts. . on the future of the risk rating. In any case, for this week he reckons there could be “moderation” and it could even be priced below $4,000.

▶️ In the latest Monthly Prospects Survey of Economic Analysts of the Republic Bank, the majority projects that the exchange rate will close in July between $3,900 and $4,000.

▶️ Analysts who participated in the June Fedesarrollo Financial Opinion Survey (latest available) estimate that the exchange rate will be at $4,080 by the end of 2024, which represents a slight increase compared to the previous month’s forecast ($4,000).

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Is it a good time to buy dollars?

Olarte points out that if he’s going to invest, which suggests a high sensitivity to risk, the dollar doesn’t seem particularly cheap. But if it is for trips or purchases, “the rate is balanced, so it is a good time to buy them if necessary.”

For Franco, the answer depends on what the user is looking for with the investment: “Under $4,000 for a family looking to save money in the long term is a good purchase price. It is always healthy to have part of the diversified portfolio in foreign currency. But, again, it depends on the vision and the particular situation of the family.”

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