February 15, 2016

The Peruvian sol (PEN) continued its steady decline in recent weeks, tumbling past the psychological barrier of 3.50 PEN per USD for the first time in 14 years. On 11 February, the sol traded at 3.52 PEN per USD, which represented a 2.5% depreciation over the same day in January and a substantial 14.0% fall in value compared to the same day last year. The sol has slipped 2.9% against the dollar so far this year.



The depreciation of the sol in recent weeks coincides with ongoing weakness in the Peruvian economy as the export sector decelerates and commodity prices hover at multi-year lows. In addition, poor economic data from China, a major importer of Peruvian exports, has fueled the currency’s decline. In an effort to stem the currency’s weakening, the Central Bank has raised the interest rate four times in six months and continues to sell USD reserves in local markets.

Panelists participating in the LatinFocus Consensus Forecast survey do not expect the sol to recover in 2016, with the exchange rate ending the year at 3.57 PEN per USD. For 2017, the panel sees the sol trading at 3.63 PEN per USD.