The exchange rate closed this Tuesday at S/3.39, below the S/3.43 registered at the close of Monday, according to data from the Central Reserve Bank (BCR). During the day, the currency traded between a minimum of S/3.35 and a maximum of S/3.40, after the volatility observed in the previous session after the presidential second round.
Asvim Asencios, Currency trader at Renta4 SAB, pointed out that the dollar fell 420 points compared to Monday’s close and explained that during the day it was strongly pressured downwards by the offer from local banks. He also specified that around US$900 million were negotiated in the market at an average price of S/3.36.
Jorge Luis Huayta, FX trader at Kambista, pointed out that the sol was the currency that appreciated the most among the main currencies in the region during the day, in a context of global weakness of the dollar. He explained that the first hour of negotiation showed a clearly bearish bias for the exchange rate, driven by local and offshore supply, with operations for around US$261 million. Likewise, he indicated that the volatility observed in the exchange market has been recorded since Friday, after the publication of the latest presidential polls, and that the close difference between the candidates continues to drive rapid hedging decisions among economic agents.
During the day, the advances of Peruvian stocks and the EPU ETF, which groups Peruvian companies listed in the United States, stood out. (ANGELA WEISS / AFP)
/ ANGELA WEISS
For his part, Alberto Arispe, manager of Kallpa SAB, pointed out that the favorable reaction was also observed in other Peruvian assets, including shares of local companies and the EPU ETF, which groups Peruvian shares listed in the United States.
“The market trusts that a Fujimori government will be better than one of Sánchez and that, therefore, the economic dynamism will be greater, the reduction in poverty will be greater, the country will be better off and the profits of national companies will grow more,” said Arispe. As he explained, the market perception is that a possible Fujimori administration would imply lower risks and greater prospects for economic growth. He added that various analysts have been making projections that tilt the probabilities of victory towards the Fuerza Popular candidate, which has influenced the behavior observed in the markets.
Meanwhile, Daniel Velandia, Managing Director of Research and chief economist of Credicorp Capital, pointed out that during the day a favorable performance was observed in all Peruvian financial assets, particularly the stock market and the sol, after the devaluations registered on Monday.
“This is explained by the possibility expressed by various political analysts of Keiko Fujimori’s victory in the elections, once the votes from abroad are considered and counted,” Velandia indicated. He added that an important part of investors associates an eventual victory for Fujimori with a favorable stance towards investment, the continuity of the economic model and the preservation of macroeconomic stability.
The economist added that during the day on Monday the markets reacted negatively while Roberto Sánchez led the count, but that the behavior reversed as the probability attributed to a Fujimori victory increased. In his opinion, if this result is finally confirmed, Peruvian assets could continue to appreciate in value and the dollar could register new falls, while an eventual victory for Sánchez could generate new devaluations.
Analysts highlighted that the intervention capacity of the Central Reserve Bank contributed to containing episodes of volatility in the exchange market.
/ EPENSA CENTER
However, José Silva, senior associate of Intéligo’s Asset Management team, maintained that the behavior observed during the day did not respond solely to political factors. He explained that the exchange rate maintained a downward trend for much of the day as a result of a normalization of market conditions after the volatility recorded at the beginning of the week.
According to Silva, investors incorporated new information regarding the electoral scenario, but external factors favorable to emerging currencies also influenced, including a weaker global dollar and a drop in oil prices. Likewise, he noted that Monday’s experience reinforced the perception that the Central Reserve Bank maintains the capacity and willingness to smooth out episodes of excessive volatility, helping to anchor exchange rate expectations.
The executive considered that local factors had a greater impact on the behavior of the exchange rate, although he warned that uncertainty still persists. “The market reading is cautious, since there are relevant institutional factors in the Peruvian economy,” he stated.
Among these factors he mentioned bicameralism, legislative fragmentation that forces consensus to be built, and the solidity of the monetary framework headed by the Central Reserve Bank. In that sense, he pointed out that the market has been carrying out a broader evaluation of governance, institutional counterweights and the capacity to implement public policies that any future administration will face.
Analysts pointed out that the official proclamation of the results and the first signs of the next government will be decisive for the evolution of the dollar and Peruvian assets in the coming days.EFE/ Elvis González
Looking ahead to the next few days, specialists agreed that the market’s attention will be focused on the official proclamation of the results and the signals issued by the next government. Arispe indicated that investors will especially observe the discourse towards private investment and the free market, as well as the appointments in key positions such as the Presidency of the Council of Ministers, the Ministry of Economy and Finance, the Ministry of Energy and Mines and the BCR.
Silva added that the evolution of electoral probabilities, the economic policy messages of the main actors, the behavior of the global dollar, commodity prices, expectations about the monetary policy of the United States Federal Reserve and the risk appetite towards emerging markets will also be relevant. Velandia, for his part, warned that volatility could continue until there is a definitive resolution of the electoral process.
