Currencies advance along with world stocks: Andes FX

(Bloomberg) Andean currencies followed the positive perception seen in equities worldwide, while risky assets ignore the sell-off of bonds that is driving higher yields. The Colombian peso was catching up with Monday's gains in other emerging markets and oil as quotes resume after a long weekend.

The Colombian currency strengthened by 1% while markets reopened after a national holiday. The peso is the main currency that currently performs the best worldwide despite the fact that oil is cutting part of the recent uptick.

Dollar inflows into South America from abroad may have resumed, as the Brazilian real and the Chilean peso made significant gains this week. The outlook for higher rates and the fact that countries are major commodity exporters are improving the outlook for the region compared to its peers in Asia and EMEA.

The Colombian peso is confined within the 200-day moving average at 3,861 per dollar and a strong technical level close to 3,750 pesos per dollar.

The leftist Gustavo Petro remains the top candidate for president according to the most recent poll, which shows that he extended his support to 32%, compared to 23% for conservative candidate Federico Gutierrez.

The Chilean peso appreciated 0.2%, slightly less than most emerging market peers after the Chamber of Deputies agreed on Monday to debate a new bill that would allow the early withdrawal of billions of dollars from pension funds.

President Boric is opposed to the new withdrawals, while Finance Minister Mario Marcel was always a strong opponent of previous bills that led to the draining of $50 billion from retirement funds, undermining local bond and equity markets.

Chamber and IBR swap curves increased to 20 basis points, in line with the movement in US Treasury yields after Fed Chairman Jerome Powell said the central bank is prepared to raise interest rates by 50 basis points at the next policy meeting if it is necessary.

On the other hand, traders seem to be confident that US rates are still too low to trigger an exit in search of quality instruments, keeping the foreign exchange markets afloat.

The Peruvian sun advanced by 0.4%, cutting losses observed in three consecutive sessions. The currency tested and failed to pass the level of the 50-day moving average, which coincides with the technical level at 3.80 soles per dollar. The year-to-date high of 3.6680 soles to the dollar remains the most immediate dollar support.

(Some of the information comes from FX traders familiar with the transactions who asked not to be identified because they are not allowed to speak publicly.)

Original Note:

COP Outperforms on Catch Up While Swap Rates Rise: Inside Andes

Davison Santana is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended to be investment advice.

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