Colombia Peso Weakens After Central Bank Said It Will Buy Dlrs

BOGOTA -- The Colombian peso weakened Monday after the central bank announced Friday that it will start buying dollars and local government bonds on the currency market.

The Colombian peso weakened to 1,950 pesos to the dollar from COP1,917 on Friday. The peso hasn't closed that weak since Sept. 17, when it ended at COP1,965.

The Colombian Central Bank said it will spend as much as COP3 trillion in buying pesos and peso-denominated government bonds, or TES. It didn't provide any further details.

The bank made the announcement after the government said it wanted the peso, which had appreciated more than 20% so far this year, to weaken.

Rupert Stebbings, a market analyst at local brokerage Interbolsa SA, said the vague announcement was intended to discourage speculators. "Such scare tactics are nothing new in emerging markets and they invariably work if well handled," he said.

Gabriel Rosas, the chief executive of local brokerage Casa de Bolsa SA, said the effect of the central bank's announcement will be short-lived.

As a result of the central bank's announcement, the yield on the benchmark 2020 Colombian peso-denominated bond fell to 8.412% Monday from 8.590% on Friday.

The benchmark IGBC stock index fell 1% to 10,897.88.

Shares of state-controlled oil company Ecopetrol SA (ECOPETROL.BO) lost 1.3% to COP2,600, while those of Colombia's largest holding company, Grupo de Inversiones, Suramericana SA (GRUPOSURA.BO) fell 1.1% to COP22,500.