Reuters: US Dollar Report: UPDATE 1-Colombia cenbank probably can't stop peso gains-board member

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UPDATE 1-Colombia cenbank probably can't stop peso gains-board member Jan 30th 2013, 18:34 Wed Jan 30, 2013 1:34pm EST BOGOTA Jan 30 (Reuters) - Colombia's central bank will not likely be able to change the upward tendency of the peso currency in the next five years, board member Juan Jose Echavarria said on Wednesday. Colombian and other Latin American policymakers have been bolstering their defenses ahead of what could be a new battle in the "currency wars" as dollar inflows put unwelcome upward pressure on their currencies. In a bid to ease gains in the currency, Colombia's monetary authority on Monday stepped up its daily dollar purchases to at least $30 million between February and May from $20 million or more now. The bank will spend at least $3 billion. "I do believe that in Colombia there is a complicated exchange rate problem that doesn't have to do with a lack of savings, it's a complicated problem that has to do with issues like Dutch disease and other things," Echavarria said. "The (central) bank cannot change the exchange rate in the next five years." Dutch disease describes an economy where money inflows from commodity exports push up the value of the local currency and hurts other sectors, like manufacturing. Echavarria is one of the monetary authority's seven board members. He and another co-director will be replaced ahead of the March policy meeting after their terms come to an end. The peso was one of the world's strongest gaining currencies last year and that tendency has continued in 2013. Since the central bank's announcement on Monday of increased intervention, the peso has continued to gain. In some ways, Colombia is the victim of its own success as improved security over the last decade opened up many parts of the country to more investment especially in oil and mining whose dollar inflows are a key reason for the peso's gains. Link this Share this Digg this Email Reprints

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