Dollar: what is the reason for the recent exchange rate appreciation?

dollar It closed on Tuesday at S/3.96 at the interbank level, hitting its highest price in six months in Peru.

Now the exchange rate is one of the highest this year, but why?

Why the dollar is rising

According to Eli Casaverde, head of the cash department at Rextie, the factors influencing the growth of the dollar are global in nature.

First, Casaverde points out that we have such a strong recovery in the price of the dollar because of the uncertainty caused by the possibility recession World.

“Most economies are close to being a bit of a growth challenge and it is expected that in the fourth quarter of this year we may present an economic recession crisis in major economies, which will lead to the dollar being sued by most investors,” — he specified.

As you remember, the US currency is considered investors as a safe-haven asset, that is, it is used when there are fears of certain economic risks that may arise on a global scale, since it is a currency that is less subject to market volatility.

“At the same time, we are seeing uncertainty caused by the fact that the dollar is strengthening against currencies that have in a certain way made it more stable or stronger in scenarios such as the one we have experienced or continue to experience in terms of inflation such as the euro or the yen, which have changed quite a lot in recent weeks,” Casaverde said.

A spokesman for Rextie indicates that this pressure will continue in the coming weeks. dollar growthas there is an expectation of the next inflation reports from the US and Europe.

“Why is inflation data critical in the coming weeks? If inflation continues to run amok and continues to rise in most countries, central banks will have to keep raising benchmark interest rates to make borrowing more and more expensive. and prevent people from continuing to consume or demand, which is the main driver of inflation,” he said.

In case the economy USA continues to show high inflation, the US Federal Reserve (Fed) may further raise its bet on a rate hike.

“This could result in the Fed not only raising 75 points at its next meeting on the 25th of this month, but could also raise the base point (interest rate) and lending with it,” he said. .

How will this affect the Peruvians?

Now Rextie appreciates that dollar In the interbank market, it can rise to the S/4.10 ceiling, which has a different effect on the pockets of the Peruvians.

First, the possibility of a global recession could lead to lower commodity prices, which would affect Latin American currencies.

“Most countries that buy from us will stop doing so in the quantities we have, the demand for raw materialswe can lose a little bit in the forecast that we want to grow and our currencies in the region will weaken while the dollar will continue to have this strength due to risk hedging,” he said.

Casaverde argues that with a stronger dollar, inflation may continue to worry Peruvians, as a more expensive dollar means higher prices for goods that are linked to imports.

“We are already going through this a few months ago with a problem inflation, which continues to be a factor of concern for the consumption of the basic basket, because the cost of most of the products that we import from abroad is predictable. Bringing food to Peru, especially to Lima, where almost 70% of national consumption is concentrated, is becoming more and more expensive,” he said.

He added that not only food imports would be affected, but also the higher cost of energy, since we are now oil importers, meaning he foresees an increase in oil prices. fuel.