By Gabriel Burin

BUENOS AIRES (Reuters) – Colombia’s peso will probably keep weak on indicators the central financial institution is popping to a wait-and-see method on rates of interest, mixed with draw back pressures from the foreign money’s mismatch in opposition to oil costs, a Reuters ballot confirmed.

The Andean nation’s foreign money is about to commerce at 4,800 per U.S. greenback at end-June, 4.2% softer than 4,600 on Monday, based on the median estimate of 24 overseas change strategists polled March 31-April 4.

The peso was one of many worst-performing currencies on the planet final yr, dropping a fifth of its worth as traders fretted about President Gustavo Petro’s push for modifications after his victory in June’s presidential runoff vote.

Officers at BanRep, because the central financial institution is understood, final week raised the benchmark charge by 25 foundation factors to 13.0%, a greater than 20-year excessive. “If March inflation behaves as anticipated, they instructed this may very well be the final hike,” J.P. Morgan analysts wrote in a report.

“Nonetheless, they continue to be information dependent. We predict this helps our underweight (view) for the peso, which has additionally decoupled from decrease oil costs these previous few weeks and affords good entry ranges for shorts.”

“Shorting”, or betting in opposition to an asset on expectations its value will fall within the close to future, was a profitable technique final yr for traders and speculators who known as the peso’s decline amid Petro’s reform drive to struggle inequality.

The foreign money has fared poorly for months even whereas Colombia’s central financial institution carried out an aggressive tightening cycle that added 1,125 foundation factors in charge increments since a pandemic-time low of 1.75%.

Client costs rose at a yearly clip of 13.3% in February, the quickest since 1999 and greater than 4 occasions the financial institution’s long-term goal of three%. However now inflation appears to have peaked, BanRep might properly pause.

Additionally, regardless of its falling pattern, a current uptick within the peso has left it comparatively overvalued versus oil market costs that stay greater than 30% under the highs of the primary days of Russia’s invasion of Ukraine, regardless of this week’s restoration. Oil is certainly one of Colombia’s prime exports.

The peso is up 5.4% because the begin of 2023, outperforming the Brazilian actual’s 4.5% acquire, but under Mexico’s peso advance of seven.8%, as sentiment over the route of policy-making in Latin America’s No.1 and a couple of economies retains diverging.

All three currencies are seen taking losses in a single yr – a 2.1% fall within the case of Colombia’s peso, 2.7% in Brazil’s unit and 6.0% for the Mexican foreign money, which in recent times has however confounded analysts’ pessimism.

(For different tales from the April Reuters overseas change ballot:)

(Reporting and polling by Gabriel Burin in Buenos Aires; extra polling by Prerana Bhat and Indradip Ghosh in Bengaluru; Enhancing by Sharon Singleton)