Sol drops against dollar, but set to keep rising

The US Dollar rose against the Peruvian Sol yesterday, closing at 3.171 soles to the dollar from and overnight rate of 3.167, on a day when the Central Reserve Bank of Peru acquired US$40 million on the international currency market.

On the street, a dollar costs around 3.172 soles, while banks are offering an average of 3.24.

However, coming days could bring further losses for the dollar, as Peruvians paying taxes look to buy soles, bringing about a consequent increase in supply, according to the Andina agency.

In the first four months of 2007 Peru’s Central Bank has bought $2.86 billion, with acquisitions so far this month amounting to $600 million. Last year, net acquisitions totaled $3.944 billion.

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2 Responses

  1. not sure why Peru is buying $, which are losing ground otherwise. must mean Peru has a positive trade balance, which is good. thanx for helping us with our deficit spending binge!

  2. My understanding (economics is largely a mystery to me…) is that influx of dollars through trade (and supposedly drug trafficking) means that people want to buy soles with dollars. If the government lets that happen unchecked, the price of the sol will rise and Peru won’t be able to export anything. Plus, foreign currency reserves are often thought of as a Good Thing, I think mainly in case of troubles ahead.
    Or something….

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