(Bloomberg) Andean currencies were weakening for the second consecutive session as an increase in US Treasury yields pushed the bulls to take profits and marginalize. Colombian inflation, which was slightly above the forecast, failed to generate a significant reaction in the market.
The Colombian peso weakened by 0.6%, in line with most emerging market pairs, especially in South America, which have seen the biggest setbacks in the last two sessions.
The continent's four major currencies were among the top five performing currencies in the world this year, leaving more room for traders to cut positions, as the global picture remains unclear.
The Colombian currency proved its way beyond the technical area near 3,730 to the dollar, but the bears took control and dragged it down within the ranges bounded by the 200-day moving average at 3,864 per dollar.
The CPI for March was 8.53% year-on-year, versus the estimate of 8.48% and 8.01% previously. The IBR curve is increasing between 4 and 19 basis points, but the variation is not so different from those seen in Chile and Brazil, as yields on 10-year US Treasury bonds rose by 5 basis points. The higher than estimated figure is considered insufficient to alter the view of Banco de la República officials that a more cautious approach to rate increases is needed to avoid excess.
The Chilean peso depreciated by 0.8% after a mixed opening. The currency is testing a technical level recently passed close to 795 pesos to the dollar. If it crosses this level, it would open the way for it to extend losses towards its 100-day moving average at 818 per dollar.
The president of the Central Bank of Chile, Rosanna Costa, reinforced the position of the government and the central bank in the face of a new round of pension withdrawals, as they would affect the ability to finance long-term investments and mortgage loans.
The Constitution Committee of the Lower House agreed on Tuesday to merge seven different bills that seek to allow more withdrawals from individual pension savings accounts.
The Peruvian sun fell by 0.4%, extending Tuesday's losses amid social unrest. President Castillo ended the curfew in the country's capital, Lima, as violent protests continue. Previously, two protesters were killed in clashes with the police.
Market reaction is moderate considering the country's political turmoil since Castillo took office last year. The sun continues to be among the best performing currencies in the world in 2022.
(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 Declines and Swaps Rise After Inflation Data: 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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