LIMA Feb 22 Peru's central bank placed $400
million in repurchase agreements in two auctions on Friday to
boost dollar liquidity as banks struggle to meet tightened
reserve rules aimed at curbing the local sol currency's historic
The move came after dollars largely evaporated from the spot
market and the overnight rate - the 24-hour lending rate between
banks, had risen to nearly 10 percent on Friday, up from 1.98
percent at the start of the year.
The repurchase agreements were auctioned in three-day
instruments - half at a 9 percent interest rate and the rest at
The monetary authority has raised reserve requirements at
least six times since May in a bid to soften the impacts of
heavy capital inflows following stimulus measures abroad that
helped the local sol currency gain 5.72 percent against
the dollar last year.
The monetary authority has also lifted the foreign
investment ceiling on the country's pension funds several times
to spur demand for dollars, and last year bought a record $13.9
billion in the local spot market.
The central bank has bought about $3.4 billion so far this
Despite low liquidity in the local spot market, it
intervened with a $10 million purchase on Friday, as the sol
picked up on good economic news in developed markets.
Analysts said Friday's intervention was driven by the
central bank's ongoing concern about the sol's gains. Exporters
say they risk losing market share overseas.
The sol has weakened 1.18 percent so far this year, but is
still traded around its strongest levels in more than 16 years.