The dollar in Colombia fell on July 3 to $3,357.82, its lowest level in over six years. Experts predict a rebound to $3,450-$3,500 if the market takes profits.
The dollar in Colombia closed on July 3 at $3,357.82, a drop of $22.87 against the Representative Market Rate (TRM), reaching its lowest level in over six years. The day recorded 1,014 transactions totaling 800 million dollars, with a minimum of $3,323.01 and a maximum of $3,353.60.
Key factors behind the dollar's decline
According to Daniel Londoño Tapia, country manager of Global66, the Colombian peso resumed its downward trend strongly in July. In the last week of June, the TRM fell by about 2.2% and has accumulated a decline of 10.6% so far this year. Since the peak of $3,800 in mid-May, the dollar has lost around 450 pesos.
Londoño explained that three factors account for this movement: two local and one external. The first was the decision of the Bank of the Republic on June 30 to raise the monetary policy rate by 75 basis points, to 12%, the highest level since April 2024. The Central Bank argued a May inflation of 5.8% and a core inflation of 6%.
The second factor was the market-friendly confidence generated by the new government. The elected president, Abelardo de la Espriella, appointed Miguel Gómez Martínez as Minister of Finance, who supported the autonomy of the Bank of the Republic and the decision to raise rates. De la Espriella also announced that he would seek to refinance external debt and sent his designated minister to Washington to meet with multilateral banks.
The US employment data weakens the global dollar
On the external front, the June employment data in the United States showed the creation of only 57,000 jobs, compared to the expected 115,000, with downward revisions for previous months. This moderated bets for an imminent hike by the Federal Reserve (FED) and weakened the dollar globally.
Additionally, the price of Brent crude oil, a reference for Colombia, remains around $70-75, and the normalisation of the Strait of Hormuz following the agreement between the United States and Iran has contributed to the stability of the energy market.
What to expect for the rest of July?
The market is now focusing on the June inflation data to be published by Dane. If inflation exceeds 6% annually, as the market anticipates, it would confirm the restrictive stance of the Bank of the Republic and provide additional support for the peso. If it surprises to the downside, it would open up space for potential rate cuts later on.
Daniel Londoño noted that the base scenario for the rest of July is a consolidation in a range between $3,320 and $3,420, with a floor near $3,320 and room for a rebound towards $3,450 or $3,500 if the market takes profits or if the peso re-couples with its regional peers.
For readers interested in the exchange rate, this implies that if you need dollars in the coming weeks, it could be a favourable time to buy, although the risk of an upward rebound is present. The decisions of the new economic team and inflation data will set the tone.
“The base scenario points to a consolidation in a range between $3,320 and $3,420, with a floor forming near $3,320 and room for a rebound towards $3,450 or $3,500 if the market takes profits or if the peso re-couples with its regional peers,” specified Daniel Londoño.
President Gustavo Petro, via his account on X, criticized the revaluation of the peso and the rate hike by the Bank of the Republic, calling it “absurd” and attracting speculative capital. However, the designated Minister of Finance, Miguel Gómez Martínez, ruled out intervening in the exchange market: “I am against interventions in the exchange rate. It has proven time and again to be useless and terribly costly,” he stated.
Gómez Martínez acknowledged that the currency's decline has been “very strong and especially very rapid,” but insisted that an intervention “always goes wrong.”
The week of July 7 will be crucial, with the establishment of sectoral commissions and the debt refinancing agenda in Washington. The June inflation data, to be published in the coming days, will be the thermometer that marks the dollar's trend for the rest of the month.
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