Thursday , October 28 2021

Dollar decline in vaccine rate against covid-19 and IMF credit – Sectors – Economy



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They rose from 695 pesos dollar in March new coronavirus pandemic and due to the fall in the price of oil, which reached a historic ceiling of 4,153.91 pesos on March 20, the price of the currency has already returned 686 pesos, specifying that half of that decline has occurred. in the last month (355 pesos) and last week there was a reduction of 143 pesos to settle at levels of 3,467 pesos on Friday.

(You may be interested in: “As a result of the crisis, they warn of the threat of populism after the crisis”).

Behind the reduction in the exchange rate, Christmas cards for those who make Christmas purchases abroad, those who buy plane tickets to travel abroad and those who arrive as an glove for importers, are three main factors. ; two of which are international and related to Colombia.

According to financial analysts consulted by EL TIEMPO, good news about the effectiveness of the covid-19 vaccine, market optimism and increased central bank liquidity needed to irrigate the world reactivations are external and major factor dollar.

Although, according to Felipe Campos, Director of Research at Alianza Valores y Fiduciaria, since the vaccine was announced, the Colombian peso has been the most valued currency in the rising country and was among the five least valued before.

Juan Pablo Espinosa, Director of Economic, Sector and Market Research at Bancolombia, announces efficiency percentages vaccine, reinforced by the decision of the United Kingdom to begin its approval, has meant a very important change in the trend of international financial markets, which in the hope of a faster recovery due to this cause, have increased the risk appetite, which leads to a very strong recovery of cash flows. investment for emerging countries, including Latin America and Colombia, which has given a big boost to the peso.

In other words, international investors, seeing the situation improving, decide to move their resources to invest in assets that may lead to higher returns despite being at greater risk.

Another key factor, according to BBVA Research chief economist Alejandro Reyes, was that given the magnitude of the global crisis, to ensure recovery and ensure market stability, central banks increased the liquidity of their economies. which also affects the increase in available dollar resources that reach all countries, in addition to reducing the currency, opening up the desire to buy shares.

(Too much: ‘In November inflation was -0.15 per cent’).

In fact, according to Colombian Stock Exchange, From October 5 to Friday, the Colcap index rose 14.8%, reflecting the stock’s valuation.

“The liquidity provided by the world’s major central banks is unprecedented. This has ultimately happened in economies with low interest rates that are unlikely to become a source of resources or seek opportunities or unpredictable tax cuts or favorable conditions for production, as has happened in the past. the last few years in the United States, ”he says.

NDF effect

The third important factor in the decline dollar, Especially in recent weeks, it has happened in recent days, when it became known that the Government was taking measures to distribute the resources requested. International Monetary Fund (IMF), through the entity’s flexible line of credit, with more than $ 5 billion, and is expected to complete the rest of the year.

In this regard, Juan Pablo Espinosa, from Bancolombia, explained that this will lead to a significant arrival of the dollar and a large amount of money to be made by the end of the year, which will lead to a higher demand for pesos and a supply of dollars.

“We expect the trend to continue in the short term, perhaps not at the pace it has been in recent days, but the revaluation trend is likely to continue for the rest of 2020,” he said.

But are the forces being pressured dollar down Are they enough to achieve a greater decline, even reaching levels of 3,282 pesos, which is the 2019 average?

According to Alejandro Reyes of BBVA Research, although this is an option, it is complex to see at the end of the year when there will be a second wave when vaccines will arrive or create system saturation. of health.

And while the prediction of closing the currency is complex, it will likely be less than 3,600 pesos, which is much less than analysts expected a few weeks ago.

(At the same time: ‘Moody’s agency keeps note of Colombia’).

Reyes added that one of the factors behind the rise in the dollar is that the volume of trade is falling a lot in the last week of the year due to the holidays, which means that those who actually need to close, buy or sell the operation have a chance to move. much on the market.

“The global trend, if nothing extraordinary happens, is heading towards a cycle of weight estimation, due to the abundance of global liquidity and the good returns offered by local assets,” he said.

By 2021, the movement would be flatter

For analysts, the exchange rate profile is likely to be flatter than initially forecast in 2021, as what has been seen in recent weeks is a forecast of a good chunk of the expected move in 2021, including vaccine and oil price improvements, among other things forecast for 2020.

“I think the most important thing is to take into account that much of the stress seen in the currency has disappeared as a result of the pandemic. This reduces inflationary pressures and costs on public and private debt,” said Alejandro Reyes, chief economist at BBVA Research.

And he adds that if the economy in 2021 avoids the hidden (infections and vaccines) in a positive way and sees a recovery in economic activity according to the forecast or better, the dollar may be able to fall to levels of 3,282 pesos by 2022.

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Omar G. Ahumada Rojas – Deputy Director of Economics and Business
And Twitter: @omarahu

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