On June 16, 2023, the Uruguayan peso closed at US$38.01 per dollar, marking a three-year low. Today it stands at U$37.95
This signifies a 4.8% nominal appreciation of the peso against the dollar this year and an 11% reduction in the dollar’s value compared to three years ago.
The Uruguayan peso’s appreciation is attributed to potential large-scale investments in Uruguay, such as the $4 billion project to build a renewable energy and green hydrogen plant in Paysandú by HIF Global.
Internationally, falling U.S. inflation and the Federal Reserve’s potential rate hike halt have led to a global dollar depreciation, promoting capital flow to regional currencies.
Domestically, the Central Bank of Uruguay’s restrictive monetary policy and the appealing spread between dollar and peso investments contribute to the peso’s appreciation.
The surplus of dollar supply over demand is another factor, with many companies operating in pesos.
This currency appreciation, however, presents challenges for sectors like trade and services, as it reduces exchange competitiveness, making Uruguay more expensive for export and tourism.
On the upside, it presents an opportunity to attract investors drawn to the country’s stability.
Predicting the dollar’s evolution is difficult due to multiple determining factors such as local monetary policy, regional developments, and actions by the Federal Reserve.
Although the peso is expected to continue its upward trend this year, there could be a potential decline next year due to the volatility induced by upcoming elections.