The probability that the price of the dollar in Colombia will approach the maximums seen last March – about 4,154 pesos – when the arrival of covid-19 in the country became evident, are quite high, since several factors gravitate on the currency. They will exert strong pressure for the remainder of this year and perhaps also for the first part of 2021.
The closing of the elections in the United States, the reappearance of contagions of the covid-19 after the reopening of the economies in the world, the deficit in the current account and the ability to maintain the investment grade are counted, in the opinion of some analysts consulted, among the main forces that the currency will face in the last part of this year.
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The cost of the dollar in the Colombian market this week completed eight consecutive days on the rise, which have the representative market rate (TRM) above 3,873.8 pesos, a level that had not been seen for four months when for a single dollar it was it paid 3,926 pesos in the country, according to records from the Banco de la República.
In these last eight days the US currency has become more expensive by about 177 pesos and is located at just 126 of the 4,000 pesos, a level that was reached for the first time this year on March 13, so if this behavior continues, soon it would be back in that range that market analysts estimate.
“We have an expectation of the dollar by the end of the year close to 3,900 pesos,” says Felipe Campos, manager of Economic Research at Alianza Valores, for whom, although the United States elections and the re-outbreak of covid-19 will play a role Important, then a period of calm will come towards November, but that depends on who is the winner in the US electoral contest.
“If Trump (Donald) wins it is possible that the dollar will calm down, but if the victory is for Biden (Joe), given that the Democratic candidate has proposed some measures against Wall Street, the pressure on the dollar will remain in the what remains of the year ”, the analyst specifies.
The weight of crude
But this is just one of the factors that haunt the greenback. For Munir Jalil, BTG Pactual chief economist for the Andean region, “what ends up happening with the oil market and its trend towards the end of the year will set the direction the dollar will have at the end of 2020.”
That is why his exchange bet points to an exchange rate of 3,750 pesos at the end of the year.
For now the prices of a barrel of oil remain above 40 dollars. The WTI, very close to 40.5 dollars, while the Brent, the main reference for Colombia, is around 42 dollars.
The behavior of this important raw material for the world will also depend on the evolution of the pandemic itself.
Juan David Ballén, Director of Analysis and Strategy at Casa de Bolsa, is one of those who believes that the dollar will remain strong, precisely because everything indicates that the number of infections with covid-19 will skyrocket, as is already the case in some countries of Europe.
“The WHO (World Health Organization) estimates that it is possible that by the end of this year the number of COVID-19 infections will rise again due to the lifting of the confinements, which would affect the recovery that the economies and the oil, ”says the expert, who warns that we must be open to a dollar, again, at 4,000 pesos or slightly above that value.
But not all the pressures that the exchange rate will have in the coming months come from abroad. Internally, there are elements that will help define the trend of this currency in the short and medium terms.
“I believe that both the current account and the capital account will generate moderate pressure,” says Andrés Langebaek, executive director of Economic Studies at Grupo Bolívar.
He explains that with the expected rebound in the economy there will be pressure on the exchange rate, to the extent that the demand for imports will grow, while the supply of dollars for exports will not be able to do so at the same rate.
“The projections of oil prices, although better, (close to 49 dollars in the Brent reference for 2021), would not be enough to generate a great dynamism in exports,” he adds.
The expected on the side of the capital account is not more encouraging. Langebaek says the country is no longer very attractive to foreign investors and this passes a significant collection account to the economy.
“Although there is the possibility that some income will be registered due to the entry of Colombia to the Barclays indices, I think that the uncertainty about the ability to maintain the investment grade and the drop in potential GDP would generate less investment flows both direct as well as indirect ”, considers the analyst.
Although under the current circumstances of unemployment, economic crisis and, especially, a pandemic, a more expensive dollar will not keep Colombians up late this year, because they will not go out en masse to vacation, it is clear that in the medium term a high exchange rate brings its negative consequences for the economy in general.
Munir Jalil, from BTG Pactual, believes that in 2021, the price of the US currency “will be marked by its strength / weakness with respect to so-called strong currencies such as the euro, the price of oil and by local factors such as our current account deficit and sovereign risk ”.
For his part, Felipe Campos, from Alianza Valores, maintains that after the exchange rate calm at the end of 2020, there will be a second upward phase in the exchange rate between January and May 2021 because inflation will rebound at the beginning of that year . “After this shock, we see that the dollar will calm down and return to land of 3,600 pesos and continue its downward trend looking for 3,300 pesos in the second half of next year.”
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CARLOS ARTURO GARCÍA M.
On Twitter: @ CarlosGarciaM66