UPDATE 2-Colombia official sees 'objective reasons' for peso ease
* Government mulling more measures to weaken peso
* Verbal intervention seen limiting currency strength
By Nelson Bocanegra and Eduardo Garcia
BOGOTA, April 17 (Reuters) - Colombia's central bank chief said on Wednesday there are "objective reasons" why the country's peso currency should ease against the U.S. dollar, while the government said it is considering more measures to weaken the peso.
The firmer peso is cutting into the revenues of exporters and causing problems for manufacturers who struggle to compete with cheaper imports.
"There are objective reasons that lead one to think that the Colombian peso should devaluate and hopefully it will continue the (downward) trend that it has shown in the past two months," Jose Dario Uribe, the central bank head, told a local radio station.
Investment in Colombia's capital markets has soared over the last decade and foreign direct investment has reached record levels, boosting the peso further and forcing the central bank to buy at least $30 million a day in the spot market to weaken the national currency.
The government and the central bank have rolled out numerous measures over the past year, using verbal as well as actual intervention, to slow gains in the peso.
Their efforts have curbed the rise in the currency, which began in 2009, bringing the peso down 3.74 percent against the U.S. dollar so far this year.
The peso weakened 0.85 percent on Wednesday, when it closed at 1,849 versus the U.S. dollar.
Uribe said he thinks the peso could weaken because he sees a possible stabilization or reduction in the value of Colombia's exports compared with the value of imports, and because the government has taken steps to increase demand for dollars.
MULLING MORE MEASURES
Finance minister Mauricio Cardenas has made weakening the peso a priority since taking office last year. Earlier this month he called the strong peso "the mother of all problems."
He unveiled a stimulus package on Monday designed to revitalize the economy and encourage pension funds to invest more money abroad, a move that could prompt them to buy $5 billion in the local currency market.
"Going forward we expect a very limited impact on the Colombian peso coming from the measures. However, verbal intervention from Cardenas has proven effective," Nomura Securities said in a report on Wednesday.
"We expect him to continue intervening verbally every time the Colombian peso rallies, which should limit its strength."
Deputy finance minister Andres Restrepo told Reuters that the government is considering further measures to weaken the peso.
"We are studying all the possible mechanisms ... We're still looking at the menu of options," Restrepo said when asked if he thought the measures announced on Monday would be enough to stem the peso.
However, he said the effect of the stimulus package on the peso will be felt in the coming weeks and that he is confident Colombia's currency will reach the 1,900 pesos per dollar "optimum" level, although he did not say when that would be.
"I think we will start to see a stronger (downward) trend in the next few days, but in general, the idea is that this process will continue," Restrepo added.
- Divers struggle in search for South Korean ferry survivors |
- Three dead in east Ukraine, Putin warns of 'abyss' |
- California city evacuation lifted after military ordnance found
- Teen in 'Jihad Jane' case to be sentenced on U.S. terror charges
- Search for Malaysia jet refocuses on drone scans of sea floor