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By Nelson Bocanegra
BOGOTA, July 21 (Reuters) – The chairman of Colombia’s central bank board of directors on Thursday defended the financial policy authority’s resolve to interfere in the country’s peso movements, even as market volatility prompted other central banks in the region to act.
The Colombian currency fell 2. 3% to 4,424 pesos to the dollar at the start of the session, just a week after it hit all-time highs against the U. S. dollar as fears of a U. S. recession hit the U. S. The U. S. and European markets boosted the dollar’s lure as a safe haven. active.
“The central bank’s policy is to leave the exchange rate loose, because when there is relaxation the adjustment mechanism is taken,” board leader Leonardo Villar said at a virtual assembly organized through investment manager Skandia.
“The long-term issue is the prospect that things can go up or down and that the market itself is guilty of adjusting them,” he said, adding that the banks’ position would discourage capital flows moving in one direction.
Last week, Chile’s central bank agreed to a $25 billion intervention in the foreign exchange market due to the recent U. S. dollar.
Colombia’s central bank last intervened in the foreign exchange market in 2020 at the beginning of the coronavirus pandemic, when it followed measures to generate dollar liquidity.
While top analysts dismiss the option of Colombia’s central bank taking steps to deal with the peso’s volatility, some argue it’s time for the financial policy authority to make its presence felt amid the overall turbulence.
“We foresee any intervention in the exchange rate,” said Julio César Romero, lead economist at investment holding company Corficolombiana.
“However, the time has come to intervene to strengthen the dollar’s liquidity in the formula and help mitigate the volatility of the peso against the dollar,” he added. (Reporting via Nelson Bocanegra Written via Oliver Griffin Edited via Alistair Bell)