Colombian Peso Hits Post-Pandemic Low Due to Election Risks

  • Colombia’s peso started the New Year by hitting a post-pandemic low. It may be a sign of things to come ahead of the May 29 presidential election.  
  • While the currency is undervalued based on fundamental factors, congressional and presidential elections will likely stoke tensions and “temper a return to fair value,” wrote Kathryn Rooney Vera, head of research and strategy at Miami-based Bulltick LLC. The peso tumbled almost 16% in 2021, despite a 50%-plus rally in the price of oil. 
  • That weakness has become a familiar story across the Andean region in the past year, with currencies sinking as left-wing candidates surge in the polls and finally win the election, spooking investors accustomed to decades of market-friendly policies. Even soaring commodity prices and rising interest rates did little to salvage the Chilean peso and the Peruvian sol last year. 
  • The peso lost as much as 0.9% to 4,105.50 to the dollar on Monday, the weakest since March 2020, before ending the day flat. It weakened again on Tuesday.

(Source: Bloomberg