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Colombia's peso increase to a seven-year high on expectations, dollar inflows will remain strong. Foreign investors will continue to bring in dollars to the country.
The peso gained 0.5 percent to 1,925.5 per dollar. The peso earlier rose as much as 1.8 percent to 1,901.4, the strongest since January 2000.
The monetary authority has also steadily ratcheted up interest rates to blunt a resurgence of inflation.
Despite those measures, Colombia's peso has strengthened 5 percent in the past three weeks and 14 percent since the start of the year which is more than any other currency in the world. The peso reached a seven-year high value.
The potential blend of inflation and a strong peso are hurting other major exporters, which are forced to pay more for raw materials and salaries even as margins on their dollar revenues shrink.
The Central Bank said Tuesday that Colombia has received $5.5 billion in net capital inflows so far this year up from just $360 million in the same period a year ago.
A little more than half of that came from direct foreign investment, which economists say is the main force behind the peso's sharp rise.
Colombia's economy expanded 7 percent in 2006 and is expected to surpass 5.5 percent growth this year.
18:33
Posted on Jun-05-2007
