2024-01-17 18:23:00
Analysts continue to wait for the Fed’s vote on interest rates.
Photo: Getty Images – Afry Harvey
The dollar closed its price this Wednesday higher, registering $3,966.50. This translates into a rise of $23.5 compared to Tuesday’s close, that is, a change of 0.59%.
The Representative Market Rate (TRM) remains at $3,940.85.
The dollar continues to show a high dependence on the decision that the United States Federal Reserve (Fed) may make regarding interest rates, since these are linked to investment. That is, the lower these are, the more incentives are created for business and, therefore, the more greenbacks circulate in the country, which ends up in a cheaper dollar.
Added to this are the geopolitical tensions that might lead to economic impacts, especially in terms of logistics. These scenarios might generate uncertainty, which in turn would increase appetite for safe-haven assets, such as the dollar, which might put upward pressure on its price.
At El Espectador we consulted several analysts regarding what is expected in the behavior of the greenback in the coming days, and this is what they said.
???? The United States economy
The United States economy is the variable with the greatest weight in the movements of the dollar. On Thursday, it was learned that inflation in that country accelerated at the end of 2023, challenging market expectations that the Federal Reserve will soon begin lowering interest rates.
The consumer price index closed at 3.4% in 2023, following the largest increase in three months, according to government figures. The monthly variation was also greater than expected.
Core inflation (which excludes food and energy prices) rose 0.3% in December from the previous month. In annual terms, the so-called underlying index rose 3.9%. Economists prefer the underlying indicator as they consider it a better measure of the inflation trend than the headline CPI.
“Inflation in the United States is stabilizing around 3%, above the Fed’s 2% goal, which will cause the entity to keep rates high longer than expected and the cut will be postponed to the second half of the year. In this way, the dollar would remain strong during the first half of the year and weaken towards the second half,” said analyst David Ballen.
Along these lines, Theodore Kahn, Director for the Andean Region of Control Risks, said that “in these first days of the year we have seen that the US inflation report was higher than expected and that indicates that there is uncertainty of that key indicator, although it is expected to continue reducing.”
The premise surrounding the price of the dollar is that the more greenbacks circulate in the country, the lower their price will be, therefore, what happens with the FED will be decisive.
Much of the dollar’s performance is tied to the behavior of the economy that produces them, that is, the United States.
In addition, geopolitical factors influence the currency. For now, “we see a complex situation in the global economy in the Red Sea in which there are attacks once morest commercial ships, which has forced routes to be changed, increasing costs. “There is also a lot of concern regarding an escalation of the conflict in the Middle East,” Kahn added.
And the national economy?
Investors – once more, those who bring the dollars – always have an eye on politics, in order to know what the Colombian economy looks like and whether or not it is pertinent to “jump into the water” with new productive projects. Therefore, beyond ideology or the political side, what is happening in the country has a weight on the price of the dollar because it can increase or reduce the flow of currency.
????Dollar price estimates
For this year, the dollar is expected to remain at relatively low levels, below the $4,000 barrier. It is likely, as stated by experts, that the thresholds of $3,800 will be reached once more. However, all these forecasts are subject to change to the extent that variables are recorded in the world that may impact shortages, such as the escalation of the conflict in Ukraine and on the Gaza border, in addition to other geopolitical tensions. and commercial.
For this coming week, the experts consulted predict a currency that might be between $3,900 and $4,000.
According to Olarte, people who think regarding investing in dollars have to analyze what they are going to invest in. First, “they have to ensure that they are formal investments; second, keep in mind that the return that the investment in dollars gives must compensate for that exposure and the uncertainty that the exchange rate gives or they may have in mind that this is going to be money that is going to stay outside, that is, always thinking in dollars and not how much they cost when they are brought.”
Diego Franco, Head of Investments at Franco Capital Asset Management, mentioned that “we believe that in the short term the market might reach $4,000 once more, that would be our expectation. For people who invest in dollars, current levels are still advisable to buy partially, either the physical dollar, through digital wallets or from foreign companies listed on the Colombian stock exchange.
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