Colombia’s finance ministry significantly increased its dollar purchases in the spot market, acquiring approximately $250 million on one day and $410 million on another, according to Gilberto Hernandez-Gomez, a strategist at BBVA in New York. This move follows the peso reaching its strongest level in almost five years and aligns with the government's strategy to prioritize foreign currency holdings, as outlined by public credit director Javier Cuellar.
The Colombian peso, despite facing several potential negative factors, has recently shown considerable appreciation against the dollar, reaching levels not seen since 2018. On August 24, 2026, the dollar traded at $3,028 during early hours, nearing the $3,000 mark, with the official market exchange rate (TRM) at $3,048.12. This represents a nearly 24% decline for the dollar compared to the same day in 2025. This appreciation occurred despite events such as the central bank holding interest rates, lower-than-expected inflation at 6.03% in July, and a magnitude 7.4 earthquake on August 10 causing an estimated $990 million to $1.98 billion in damage.
The peso's strength is largely attributed to its trading against the dollar rather than domestic factors. Analyst Volkmar Baur from Commerzbank noted a shift in market expectations for Fed cuts, which initially priced in 60 basis points of cuts against a G10 average of 10 basis points of hikes. This gap closed, with recent expectations for the Fed being scaled back, while those for other developed markets have not. The softer inflation print in Colombia also raised the real policy rate to 5.97% from 5.86% without a direct intervention from the central bank. The dollar's overall weakness and market uncertainty regarding US monetary policy, coupled with commodity market performance, particularly oil price fluctuations, have also contributed to the peso's gains.
The strong peso, while benefiting importers, has raised concerns among exporters. Bruce Mac Master, president of the National Business Association of Colombia (ANDI), warned that the peso's appreciation reduces the competitiveness of Colombian companies selling abroad, leading to lower profit margins. He argued that a strong peso is detrimental to employment and domestic production, making Colombian products more expensive in dollar terms. ANDI has urged the central bank to consider lowering interest rates to alleviate pressure on the exchange rate and discourage massive international capital inflows. Analysts suggest that for every $100 decline in the TRM, Colombian exports could fall by approximately $400 million.
