Peru’s Currency Expected to be Stable During Remainder of Year

The exchange rate between the Peruvian sol and the U.S. dollar will likely stay in its current range during the remainder of this year, private pension fund AFP Integra said.

AFP Integra, part of the Colombia-based Sura Group and the largest private pension fund in Peru, estimates that the sol will finish 2013 at a rate of 2.75 to 2.80 per dollar. Currently, the sol is trading at 2.77 per dollar, according to the central bank.

Renzo Castellano, the head of investments at the pension fund, said that its forecast is based on the Central Bank interventions in the spot market to put a ceiling on the exchange rate at 2.80.

In the past few months, when the sol has increased above 2.80, the Central Bank has intervened by selling dollars in the foreign exchange market. The Central Bank seeks to avoid wide swings in the exchange rate as a large section of Peru’s economy is still in dollars. About 40 percent of Peruvian loans are in the greenback, according to Asbanc, the country’s banking association.

According to daily Gestion, Castellano said that he expects Peru’s sol to be one of the more stable currencies in Latin America in the coming months.

“The fundamentals of Peru, in terms of flows, are better than other countries in the region, so the sol should have more of a cushion than other regional currencies,” he said.

Castellano said the exchange rate will be highly dependent on what happens in the United States regarding raising its debt ceiling.

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