Peru’s sol will likely continue to appreciate against the U.S. dollar for at least another year, according to the second biggest bank in the Andean country, BBVA Banco Continental.
Banco Continental’s chief economist, Hugo Perea, said he expects the Peruvian currency could reach 2.50 soles per dollar, financial daily Gestion reported.
“We agree with many analysts that the exchange rate could be close to 2.5 next year if the growth conditions for the Peruvian economy continue,” Perea said.
Peru’s sol is trading this week around 2.57 to 2.58 per dollar, an appreciation of around 4 percent compared to the dollar this year.
The Central Bank has said that the sol will likely continue to strengthen for the next two to five years, although Perea said this will depend on many factors.
Perea pointed to a deterioration in the global economy and a “hard landing” by China as areas that could result in greater exchange rate volatility.
Some exporters are saying that a stronger sol is harming their business, as their goods become more expensive abroad. At the same time, people whose savings and salaries are in dollars, or who receive foreign exchange income, are feeling the crunch as their soles income is not as large as it once was. Five years ago, the exchange rate was around S/.3 to the dollar, appreciating to 2.90 and 2.80 between 2008 and 2010, to settle at around 2.70 last year and 2.67 earlier this year. One thousand dollars in 2007 was equal to 3,000 soles, whereas it is now less than 2,600.
Peru’s government has been looking at measures to slow down the appreciation trend.