Nuevo Sol climbs to 12 month record high

08-09-2009 11:22

The Peruvian Nuevo Sol climbed to the highest level in nearly 12 months as an US report demonstrated that the unemployment rate fell surprisingly, which had a positive effect on the attractiveness of emerging market investments. Chile’s national currency continues to depreciate, while the Bolívar Fuerte, Venezuela’s new currency, went up.

Attractiveness Latin American assets

Ricardo Gomez, head of fixed-income sales and trading at Larrain Vial SA in Santiago de Chile, stated: “The US equity market is rising on the back of today’s reports from the US, which is generating optimism among investors, increasing the attractiveness of equities and currencies in Central and South America.” Unemployment in the US showed a weaker pace than economist projected and for the first time since last year’s April the unemployment rate decreased.

Nuevo Sol

The Peruvian Nuevo Sol rose 0.9% to 2.929 a Dollar; the highest level since last year’s August 27, from yesterday’s 2.954. The return on Chile’s 8.6% sol-denominated bond due August 2017 dropped 0.03% to 5.32% at 4:54 New York time. Central de Reserva del Perú, the Peruvian central bank, reduced its benchmark lending rate 0.75% to 1.25% Thursday, while the inflation rate on a yearly basis dropped to the lowest level in two years. The growth of Peru’s economy weakened as consumer demand decreased, while most economist estimated a decline of 0.5%.

Potential to rise

Gonzalo Navarro, currency trader at Banco Santander Central Hispano SA's unit in Lima, Peru, commented: “The rate cut is likely to be followed by a decline versus the US Dollar considering the Peruvian Sol’s low yield. However, it appears that Peru’s national currency has potential to rise further as it runs behind other currencies in Latin America.”

Chilean Peso

This Friday, the Chilean currency dropped for a third day, falling 0.1% to 543 a Dollar, from Thursday’s 542.25. The return on Chile’s 10-year Peso bonds in inflation-linked currency units, Unidad de Fomento (UF), dropped 0.02% to 2.86%.

Venezuela

The Bolívar Fuerte gained 40 basis points to 6.93 a Dollar, from Thursday’s 6.96, according to traders. The Venezuelan government fixed its national currency at an official exchange rate of 2.15 a Dollar under limitations that were placed in 2003. Venezuela’s Superintendent increased the required minimum capital that exchange houses and banks must possess, which should result in improved confidence in the Venezuelan financial system.

Argentina

The Peso Argentino, remained almost unchanged at 3.8268 a Dollar in comparison with Thursday’s 3.826. The return on the Argentine inflation-linked Peso bond due in 2033 also moved very little at 13.03%, reported Citigroup Inc. Argentina. Colombian markets were closed today since August 7 is a national holiday in Colombia in commemoration of the Battle of Boyacá, in which Colombia acquired its definitive independence.