In the course of July, the exchange rate of the dollar against the peso has been subject to a context of volatility particularly high. This led to the Market Representative Rate (TRM) marking new all-time highs consecutively since July 4, thus surpassing the reference of $4,154 on March 20, 2020 and leaving a new maximum of $4,627 on July 13.
This movement ignited many alarms about the financial impact it represents for many companies and households, leading to a more challenging macroeconomic situation, especially to the extent that it can be added as an additional pressure factor on prices in the midst of the most challenging inflationary context for the country so far this century.
For Bancolombia’s economic analysts, it is necessary to take into account that at the international level, 2022 has been a year characterized by the prevalence of a great deal of turbulence. This has led to the consolidation of risk aversion in international financial markets, in the midst of a trend of continuous reduction in available liquidity.
Likewise, they pointed out that at the regional level, political uncertainty has become consolidated as a factor that has increased the perception of risk. The Colombian peso is the most sensitive currency in Latin America to the strength of the dollar and the perception of regional risk. So this helps
understand some of the recent dynamics.
The researchers from the financial entity added idiosyncratic factors to the economic context, such as external vulnerability (the high current account deficit) that would explain another large part of what was seen in the previous weeks for Colombia and Chile.
“This environment implies that the peso will continue to operate in a channel of wide volatility. Now, our equilibrium value exercises against the fundamentals suggest that the price of the dollar should tend to range between $4,120 and $4,170 in the short term”, they noted.
Given the local and international perspective, Bancolombia analysts consider that the results of their calculations reaffirm the projection of an exchange rate between $4,200 and $4,300 during most of the second half of 2022 and 2023.
For its part, the Fedesarrollo Financial Opinion Survey highlighted that in June the exchange rate closed at $4,127.47 with a monthly depreciation of 5.50%, reaching its maximum value for the month on June 29 ($4,129.87) and its minimum value on June 6 ($3,771.63).
But, for this July, analysts consider that the exchange rate will be in a range between $4,365 and $4,546 with $4,495 as the median response.
In addition, the Analysts surveyed by Fedesarrollo forecast that the exchange rate at the end of the year will be around $4,200, which accounts for an increase in expectations compared to the previous month ($3,820).