Dollar at $3.974 returned to the level of July 17, 2024

As has been the trend over the past year, the foreign exchange market saw further declines on July 2, and the dollar fell back to the same level as on July 17, 2024.

The opening price was $4,000, with an average price of $3,974.54. The day's low was $3,949, and the high was $4,005.

However, market performance in the last hour of trading was slightly bullish. According to Paula Chaves, market analyst at asset broker HFM, the dollar in Colombia is extending its downward trend after breaking the $4,000 support level, opening the way for further declines to levels such as $3,805 and $3,747, although occasional rebounds could occur in the short term. See more: Strong impacts: the country loses at least $2.8 billion annually due to school dropouts. This behavior is part of an international context marked by the weakness of the dollar, trading near its lowest levels in three and a half years, driven by expectations of a key employment report in the US and positive signals in the trade arena.

He said that in this environment, the Colombian peso consolidated its position as the best-performing currency globally in July, boosted by the rebound in oil prices, the appeal of the carry trade (borrowing money in a currency with a low interest rate and investing in another currency with a higher interest rate), and a greater appetite for risk in the markets.

Globally, the market reacted to better-than-expected U.S. employment data, reflecting a solid labor market and generating significant movements in risk assets.

Furthermore, Donald Trump's imminent signing of the debt ceiling bill has increased fiscal uncertainty, further weakening the dollar.

See more: Travel without paying more: this is how you can plan your vacation with loyalty programs​ He warned that a short-term technical rebound towards $4,100 is not ruled out, to subsequently resume its downward trajectory with possible declines towards the $3,800 level.

Today, Friday, the Colombian market will operate in Next Day trading mode due to the U.S. Independence Day holiday, so trading is expected to be low. The Representative Market Rate will remain at $3,974.37 until Monday the 7th.

The good and the bad

For Lorena Moreno, an analyst at Western Union's Economic Research firm, Acciones y Valores, that despite the figures revealed for an increase in remittances in May (US$1.096 billion) , due to the revaluation of the peso, this represents fewer resources for the families who receive them in Colombia, "affecting consumption, food, education and health." See more: One person dies on average every day from work-related causes.

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The lower exchange rate has positive effects for businesses and individuals with dollar-denominated debts due to lower financing costs, and it also eases the budgets of those who spend money in foreign currency. Furthermore, there is a beneficial effect on the family basket, with the component of imported goods.

Alejandro Reyes, chief economist at BBVA Research, stated that the dollar is experiencing a marked weakening cycle worldwide , which began about six months ago and has seen specific periods of weakness. One of these was observed last week with the passage of a law in the United States Congress that raises further doubts about the economy's capacity for fiscal consolidation. This, combined with other geopolitical factors and investor preferences, has led to the DXY index, a basket that measures the dollar against the seven strongest currencies, weakening significantly and reaching levels not seen since 2022.

See more: United States withdraws visas from officials close to President Petro. In this context, the region has also benefited from an appreciation of its currencies, with an earlier and faster movement in countries like Mexico and Chile, and later but equally significant movements in Colombia. This movement is primarily due to global factors.

However, in Colombia's case, the delay in appreciation relative to other economies in the region may be due primarily to challenges and uncertainty on the fiscal front.

News that would have the dollar at a higher price

Analysts believe that if it weren't for the international environment, the dollar in Colombia would be at a higher price and cite factors such as the challenge posed by the Medium-Term Fiscal Framework, the announcement of a tax reform and a fiscal reform in 2026, the suspension of the fiscal rule until 2028, a decision that entails a high cost in terms of institutional confidence in this tool, the downgrades of the country's rating by Moody's and Standard & Poor's and the suspension of the International Monetary Fund's flexible credit line, among others.

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