24 Apr 2014
Latin America EM Express: Colombia steps up dollar purchases
FXStreet (Łódź) - This week Colombia's Finance Minister Mauricio Cardenas announced that the country's central bank would increase its dollar purchases, following the considerable strengthening of the peso over the last month.
The currency has been propped up by an increase in foreign investment in Colombia's financial markets. Today the peso was trading around 1,938 against the greenback, compared with around 2,040 one month ago.
The central bank's dollar purchases in its daily spot market interventions, averaging 10 million dollars a day, have been boosted by 80%.
The BBH Global Currency Strategy Team comment: “To be clear, the central bank is still working within the $1 bln purchase program for Q2 that it set at its March meeting but is just front-loading it and responding to increased inflows.”
“Fresh inflows are in part related to the increase in weighting of Colombia in the JPM local currency bond index. We think that 1900 is the line in the sand (for now). If the EM rally continues, they can slow the move but not stop it.”
Economic data
Mexico's annual 1st half-month Inflation, released on Thursday, slowed down to 3.53% in April from 3.76% in March, increasing expectations that the country's central bank will remain on hold for the rest of the year in order to prop up the economic recovery. 1st half-month Core Inflation jumped to 0.26%, from 0.11%.
On Wednesday Banco Central do Brasil informed that the Brazilian Foreign Exchange Flows increased to 3.38B from 1.00B
Technicals
USD/MXN was up by 0.33% at 13.1072 at the moment of writing. On Wednesday the daily FXStreet Trend Index was slightly bullish, with the OB/OS Index neutral. RSI sat at 47 at the last close, and has risen to 74 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 318 pips, with ATR (14) shrinking at 726 pips. The 1D 200 SMA was at 13.0660, while the 1D 20 EMA was at 13.0740.
The currency has been propped up by an increase in foreign investment in Colombia's financial markets. Today the peso was trading around 1,938 against the greenback, compared with around 2,040 one month ago.
The central bank's dollar purchases in its daily spot market interventions, averaging 10 million dollars a day, have been boosted by 80%.
The BBH Global Currency Strategy Team comment: “To be clear, the central bank is still working within the $1 bln purchase program for Q2 that it set at its March meeting but is just front-loading it and responding to increased inflows.”
“Fresh inflows are in part related to the increase in weighting of Colombia in the JPM local currency bond index. We think that 1900 is the line in the sand (for now). If the EM rally continues, they can slow the move but not stop it.”
Economic data
Mexico's annual 1st half-month Inflation, released on Thursday, slowed down to 3.53% in April from 3.76% in March, increasing expectations that the country's central bank will remain on hold for the rest of the year in order to prop up the economic recovery. 1st half-month Core Inflation jumped to 0.26%, from 0.11%.
On Wednesday Banco Central do Brasil informed that the Brazilian Foreign Exchange Flows increased to 3.38B from 1.00B
Technicals
USD/MXN was up by 0.33% at 13.1072 at the moment of writing. On Wednesday the daily FXStreet Trend Index was slightly bullish, with the OB/OS Index neutral. RSI sat at 47 at the last close, and has risen to 74 so far today. Daily 2-StDev Volatility Bandwidth was shrinking at 318 pips, with ATR (14) shrinking at 726 pips. The 1D 200 SMA was at 13.0660, while the 1D 20 EMA was at 13.0740.