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Peruvian sol rallies against dollar

Peruvian sol rallies against dollar

Posted by Juan Gavasa on August 09, 2014

Peru’s sol rallied after the country’s central bank unexpectedly kept borrowing costs unchanged Thursday on the prospect of growth rebounding on higher copper production and fiscal spending, it has been reported.

The Peruvian currency strengthened 0.4 percent to 2.804 per U.S. dollar at 9:22 a.m. in the nation’s capital Lima, the most since July 3, according to Datatec prices. That’s the steepest increase among the five most traded currencies in Latin America.

Peru held the overnight rate at 3.75 percent yesterday, surprising 12 of 18 economists surveyed by Bloomberg who forecast a quarter-point cut to 3.50 percent.

Six analysts expected no change. At the same time policy makers lowered the reserve requirement ratio for soles to 11 percent from 11.5 percent.

“Rates will stay on hold for the rest of this year,” said Francisco Rodriguez, an economist at Bank of America Corp

Likewise, he went on to point out that lowering reserve requirements suggests the central bank board considered these policy measures as alternatives to address the economy’s deceleration.

“Thus, inflationary pressures limit its ability to further loosen policy,” the specialist said.

The Central Reserve Bank (BCR) of Peru unexpectedly cut the key rate by a quarter-point last month after the economy lost momentum in the first half of 2014 amid an export slump.

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