Foreign stimulus may pressure Peru's sol - central bank
Por Omar Mariluz
LIMA, Sept 7 (Reuters) - Stimulus measures by the European Central Bank could boost capital flows into Peru and put pressure its sol currency to appreciate, a Peruvian official said on Friday.
Adrian Armas, the Peruvian central bank's head of economic studies, said global economic uncertainty appears to be decreasing and, in turn, increasing appetite for higher-yielding emerging market assets.
The European Central Bank has unveiled an aggressive bond-buying plan to push down yields while, analysts say, the U.S. Federal Reserve has left the door open for more quantitative easing.
"When you have this panorama of lower international risk, capital looks for returns in countries like Peru. Short-term capital inflows have been noticed," he told reporters.
"Statements by the European Central Bank where it mentions its willingness to intervene in public debt markets are, in general, calming markets," he said.
Peru's central bank last week raised reserve requirements on bank accounts denominated in dollars, a bid to reduce the influence of short-term foreign capital and the pace of credit growth. It made a similar move in May.
"One of the effects of reserve requirements is to reduce dollar liquidity and availability in the economy and this has an indirect effect on the exchange rate," he said, Armas.
The sol has appreciated 3.26 percent so far this year to 2.60 per U.S. dollar, near its strongest level in 15 years.
The central bank has blunted the gains by intervening heavily, purchasing $10.2 billion so far year.
Armas said that the supply of dollars on the local market also comes from domestic portfolios moving dollars into soles.
About half of Peru's bank deposits are in dollars and the central bank has always made clear it works to avert currency volatility in a country where many people are paid in soles but owe debts in dollars.
Many emerging markets, especially Brazil, have criticized the Federal Reserve for introducing too much liquidity into the global financial system and causing excessively strong valuations in the Brazilian real, hurting export competitiveness.
Brazil has urged emerging countries and the International Monetary Fund to support measures to defend against excessive appreciation of local currencies.
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