The Colombian peso led losses among emerging-market currencies on Wednesday, weighed down by rising fiscal risks and volatility in oil prices, the nation’s chief export commodity. The peso weakened by as much as 2% against the US dollar, reaching its lowest value since May 2023. So far, the currency has fallen over 14% this year, becoming increasingly vulnerable to global risk sentiment shifts as the US dollar has strengthened since Donald Trump’s election victory, according to Andres Pardo, head of Latin American macro strategy at XP Investments.
Concerns over Colombia’s fiscal stability have grown due to recent news surrounding government finances. Notably, telecom giant Telefonica recently won a $380 million arbitration award against Colombia, adding to worries about the country’s fiscal health and debt obligations.
Adding pressure, Brent crude prices—essential for Colombia’s export revenue—dropped 3.6% over the past week. Although oil prices recovered slightly on Wednesday, the decline has impacted the peso’s performance in the currency market, given Colombia’s reliance on oil for foreign revenue.
The peso managed to recover some losses by mid-day in New York, trading at 4,502 per dollar, though still hovering near a critical psychological threshold. Analysts at BBVA noted that the peso may seek to rebound, particularly in comparison to other Latin American currencies like the Mexican peso, which has seen smaller losses since the US election.
