August 19, 2015 / 6:36 PM / 5 years ago

Peru central bank has 'growing fears' of U.S. rate hike impact

LIMA, Aug 19 (Reuters) - The president of Peru’s central bank said on Wednesday that he is increasingly fearful of the impact an expected interest rate hike in the U.S. even though the sol currency’s daily losses against the dollar should ease after the move.

“We really have growing fears with respect to the impact on the withdrawal of monetary stimulus in the U.S.,” Julio Velarde told reporters while attending an event.

His comments follow the central bank’s announcement last week that it might raise the benchmark interest rate as early as next month to counter currency-driven inflationary pressures.

The sol has slipped to fresh six-year lows against the dollar every day over the past week despite central bank interventions in the local spot market with about $400 million in dollar sales.

Velarde said the sol’s recent losses were driven by speculation.

“Currency pressures are more driven by people betting the exchange rate will go up than because of actual capital flows,” Velarde said.

Market volatility would likely continue until the Federal Reserve raises rates, Velarde said. Afterward, “there should be no reason for the exchange rate to rise further.”

Reporting By Teresa Cespedes, Writing by Mitra Taj; Editing by Alan Crosby

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