Colombia Peso Drops on Size of Rate Cut; Argentine Peso Falls

By Andrea Jaramillo

March 2 (Bloomberg) -- Colombia’s peso fell near its lowest level in more than two years after the central bank last week cut its lending rate by an unexpected full percentage point.

Banco de la Republica on Feb. 27 lowered its overnight lending rate to 8 percent from 9 percent as policy makers battle slumping economic growth. The move, which was announced after markets closed, was forecast by only one of 35 economists surveyed by Bloomberg News.

The peso tumbled the most in almost two weeks, weakening 2 percent to 2,594 per dollar at 8:58 a.m. New York time, from 2,554 on Feb. 27, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX. The currency on Feb. 24 touched 2,610, its lowest level since June 2006. The peso has plunged 13 percent this year, the biggest drop among the six- most traded currencies in Latin America.

The yield on Colombia’s 11 percent bonds due in July 2020 rose eight basis points, or 0.08 percentage point, to 9.63 percent, according to Colombia’s stock exchange. The bond’s price fell 0.577 centavo to 109.114 centavos per peso.

In Argentina, the peso had its biggest drop in more than a week, declining 0.4 percent to 3.5786 per dollar, from 3.5650 at the end of last week. It earlier touched 3.5805, the lowest since November 2002. The currency is down 3.5 percent this year.

Argentina’s government will have more difficulty financing its needs next year as the global financial crisis worsens the outlook, Moody’s Investors Service’s Vice President Gabriel Torres wrote in a report today.

The yield on the country’s inflation-linked peso bonds due in December 2033 rose one basis point to 19.63 percent, according Citigroup Inc.’s local unit.

Chile’s peso declined 0.8 percent to 601.55 per dollar, from 596.75 yesterday. The currency has gained 6.1 percent so far this year.

The yield for a basket of Chile’s five-year, fixed-rate peso bonds rose five basis points to 3.48 percent, according to Bloomberg prices.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net;