Americas > South America > Uruguay > Uruguayan peso breaks the 30.00 UYU per USD mark in January

Uruguay: Uruguayan peso breaks the 30.00 UYU per USD mark in January

2016/01/16

On 4 January, the Uruguayan peso broke modern records and breached the 30.00 UYU per USD mark. By 13 January, the peso had continued its depreciatory trend unabatedly and reached 30.65 UYU per USD, marking a 3.2% monthly decrease. The figure is as well 24.6% weaker than the corresponding period in 2015. The currency would have witnessed a starker depreciation,, had it not been for the central bank’s efforts to contain the depreciation of the currency.

Uruguay is not alone at the same time as it comes to currency pressures, as the recently initiated tightening cycle by the Fed has prompted a steady outflow of capital from emerging markets in the US, strengthening the USD and weakening other currencies. Prices for Uruguay’s agricultural exports, inclunding meat and soya exports, have as well fallen, further exacerbating the situation.

The weaker currency has pushed up inflation via higher imported prices, forcing the central bank to act. The Bank’s active foreign exchange reserves have fallen steadily since the beginning of December as it tries to limit volatility in the FX markets. Currently, the Bank still holds ample reserves, however protracted interventions in the FX markets could reduce the country’s fiscal buffers, thereby putting further pressure on the peso.
Panelists surveyed for this month’s LatinFocus statement see the peso ending this year at 33.1 UYU per USD. Next year, the panel sees the currency trading at 34.5 UYU per USD.

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