A turbulent year for the markets and especially for the emerging currencies ends with a strong dollar as a result of the increases in interest rates by the Federal Reserve and the announcements of a very possible economic recession in 2023.
According to Bloomberg figures, the Colombian peso ends up as the second most devalued currency in Latin America and the third among emerging currencies with a variation of -15.9%.
The currency is only preceded by the Argentine peso with a 41.8% decline. In contrast, the Chilean peso increased 0.02%, followed by the Peruvian sol, with a revaluation of 4.9%; the Mexican peso, with 5%; and the Brazilian real, with 5.5%.
“This year leaves us as one of the most undervalued emerging currencies, only surpassed by the Turkish lira and the Argentine peso.
The external factor with the monetary policy adjustment of the central banks was one of the points that explained the devaluation, but the internal context with the political factor sharpened the trend in the second part of the year,” said Gustavo Acero, economist for Colombia at Bank of Bogota.
The experts agreed that during the first part of 2023 the Colombian currency will be influenced by the following movements in interest rates at the local and international level and internally it will depend on the way in which the reforms of the Petro government are addressed, especially a that seeks to modify the pension system and another of a labor nature.
“This year, looking at the slide of the pound and the euro, it is impossible not to think that we are taking it out of the stadium, and even Chile, very close to us. This if we look at all the currencies in the world, except the most important for us , the Latin American ones, where the interest that the region is generating with Mexico, Brazil and Peru, the only currencies in the world that beat the dollar, is amazing,” said Felipe Campos, Investment and Research manager of Alianza.
According to the expert, despite the investment trend in Latin America, the lag of the currencies of Chile and Colombia is due to deficits and political uncertainty. “Surely both affect and also mix (the past government spent to maintain social and political stability and the current government has promises to keep),” he added.
At the international level, the price of the dollar has continued its moderation in recent days, according to experts due to the caution towards 2023, a year that expects global recessions.
“Investors go into 2023 with a cautious mindset, prepared for more rate hikes and expecting recessions around the world.” Craig Erlam, a senior market analyst at Oanda Europe Ltd, told Bloomberg.
In addition, “there is China and its U-turn in covid prevention. It has been a great change from fighting all the cases to living with the virus and that creates enormous uncertainty for the beginning of the year”, completes Erlam.
Hong Kong removed limits on gatherings and testing for travelers in a new version of its latest major covid rules, offering a boost to the global economy but raising concerns it would amplify inflationary pressures and spur policymakers. of the US to maintain strict monetary adjustments.
