USD
The dollar (USD), as measured by the DXY, is trading around 92.79 units, with appreciations of 0.06% day/day. The currency closes the week in positive territory, following weeks of losses in which the currency reached April 2018 lows, a performance leveraged by the fall in technology stocks, which fueled a surge in risk aversion in global markets. Added to this are positive macroeconomic indicators this week, adding strength to the US dollar. However, there are signs that the labor market's recovery from the depths of the pandemic is faltering, as government financial support has practically exhausted. This is in light of the results, which, while below market consensus, demonstrate the recovery of labor market absorption, while the unemployment rate for August was better than expected. Under these conditions, we expect trading ranges between 92.45 and 93.35 during the day.
COP
The Colombian peso (COP) appreciated 0.04%, trading at 3,687.19 pesos per dollar at the close of the previous session. This despite a buying influx of the US dollar amid weak Brent crude oil prices. The local currency reportedly benefited this week from the inclusion of Colombian TES in the Bloomberg Barclays indices. Amid this context, the Colombian peso gained 1.4% this week, becoming the best-performing emerging market currency after the Brazilian real. Despite this, the currency yesterday reversed six days of gains and lost 0.9%, closing the day at $3.691,10 per dollar amid widespread negative sentiment driven by uncertainty about the health of the US labor market. We expect a trading range of $3630–$3690 during the session.
EUR
The euro (EUR) fell -0.07% to US$1.1840. The euro suffered a slight depreciation after German industrial goods orders rose 2.8% less than expected. Meanwhile, European Council President Charles Michel said that squaring the circle in the rule of law mechanism for European Union funds is the biggest challenge to implementing the coronavirus recovery agreement, which weighed on the euro. Finally, hours later, investors will be awaiting a speech by ECB member Philip Lane on the future of the bloc's monetary policy. We expect the euro to trade within a trading range of US$1.1787–US$1.1905 during the day.
During the week we expect the exchange rate to remain below the 3,000 pesos barrier as local fundamentals continue to show a recovery of the local economy, and interest rates remain attractive for foreign investors. Thus, low local political and fiscal risks favor investment in other emerging countries such as Brazil and South Africa.
The local exchange rate in October showed significant devaluation pressures, which exceeded 8% and consolidated it as the worst performing currency among its peers. Emerging markets showed considerable capital outflows (the largest since June 2013) due to persistent levels of volatility that affected global stock indexes. Asian and Latin American countries were the most affected, where we highlight the significant buying interest in dollars in Colombia by Offshore agents, who accumulated dollars for $3,775 million, mainly in the forward market.
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